Rising Electricity Subsidy Sparks Concerns Over Potential Tariff Hike in October 2024

The Nigerian government may introduce another increase in electricity rates in October 2024, as the country's monthly power subsidy surged to N181.63 billion in September. This significant rise has prompted widespread concerns, with many speculating that electricity tariffs could be raised again to offset the growing subsidy burden.

Data from the Nigerian Electricity Regulatory Commission (NERC) shows that the Federal Government’s electricity subsidy increased from N102.30 billion in May to N181.63 billion by September. In the past three months alone, the government paid N163.87 billion in July, N173.88 billion in August, and N181.63 billion in September.

In April 2024, NERC announced the removal of subsidies for customers connected to Band A feeders, increasing tariffs to N225 per kilowatt-hour for those receiving at least 20 hours of electricity per day. However, the decision was met with significant backlash, particularly from labor organizations, educational institutions, and healthcare facilities whose electricity rates tripled following the removal of subsidies.

The government responded by cutting the Band A price to N206.80/kWh in May after the subsidy amount dropped to N102.30 billion. According to NERC, the adjustment was linked to fluctuations in the Naira's value against the dollar.

Despite these changes, the subsidy spiked again to N158 billion in June, and in early July, the electricity rate was raised to N209/kWh. By September, NERC estimated that the exchange rate would reach N1,601.5, further impacting electricity generation costs.

Additionally, the Nigerian Midstream and Downstream Petroleum Regulatory Authority maintained the benchmark price of gas-to-power as of September, in line with Section 167 of the Petroleum Industry Act 2021. This increase in generation costs, combined with an inflation rate of 32.15 percent in August 2024, has fueled speculation that another tariff hike may occur under the Multi-Year Tariff Order (MYTO) in October.

As Nigeria faces increasing costs for electricity generation, the public awaits further announcements on potential government interventions to address the growing financial burden.