Fed Govt. Pays N205bln Subsidy on Electricity in Q3- NERC
The Federal Government paid about ₦205bn as electricity subsidy in the third quarter of last year, according to data obtained from the Nigerian Electricity Regulatory Commission (NERC) latest report.
The Commission’s third quarterly market report revealed the government incurred a subsidy obligation of about ₦205bn in 2023/Q3 (average of ₦68bn per month), which is an increase of ₦69bn compared to the ₦135bn (average of ₦45bn per month) incurred in 2023/Q2.
This increase in subsidy payment, according to the report, was largely attributable to the government’s policy to harmonise exchange change rates due to the absence of cost-reflective tariffs across all electricity distribution companies (DisCos).
In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding.
This funding is applied to the Nigerian Bulk Electricity Trading (NBET) invoices that are to be paid by DisCos. The amount to be covered by the DisCo is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation (MRO) in the periodic Tariff Orders issued by the commission. Naira Skids as FX Turnover, External Reserve Decline
The NERC said the rise in the government’s subsidy obligation meant that in Q3/2023, DisCos were only expected to cover 45 per cent of the total invoice received from the commission. The development comes on the heels of a report by NERC, that DisCos did not remit about ₦50bn to the power sector in the third quarter of last year.
According to NERC, the DisCos failed to remit about ₦50bn to NBET in Q3/2023. Under the market remittance section of the Q3 2023 Quarterly report, NERC said that the cumulative upstream invoice payable by DisCos was about ₦208bn, consisting of ₦167bn for generation costs from NBET, and ₦41bn for transmission and administrative services by the Market Operator (MO).
Of the amount, NERC said the DisCos collectively remitted the sum of ₦158bn consisting of ₦124bn for NBET, and about ₦34bn for MO), leaving an outstanding balance of ₦50bn. This translates to a remittance performance of about 76 per cent in 2023/Q3 which is down by about 19 per cent, compared to the 95 per cent recorded in 2023/Q2.
In 2023/Q3, the MRO-adjusted invoice from NBET to the DisCos was ₦167bn, while the total remittance made was ₦124bn, which translates to a 74 per cent remittance performance. The remittance performance of DisCos to NBET in 2023/Q3 (74 per cent) was a 25 per cent decrease compared to the 99 per cent remittance performance recorded in 2023/Q2.
The notable decline in remittance performance by DisCos is a result of the 18 per cent decrease in remittance in 2023/Q3 (₦124.53bn), compared to 2023/Q2 (₦152.48bn) even though the MRO adjusted invoice in 2023/Q3 (₦167bn) increased by about 9 per cent compared to 2023/Q2 (₦154bn).
The total revenue collected by all DisCos in 2023/Q3 was about ₦268bn out of the ₦349bn billed to customers. This translates to a collection efficiency of 76 per cent.
