Nigeria Faces Potential Electricity Tariff Increase as Monthly Power Subsidy Reaches N181.63bn

Nigeria is on the brink of another electricity tariff hike, driven by a major rise in the country's monthly power subsidy, which has surged to ₦181.63 billion in September from ₦102.30 billion in May.

This increase follows a series of monthly payments by the government, including ₦163.87 billion in July and ₦173.88 billion in August. The Nigerian Electricity Regulatory Commission (NERC) had previously announced the removal of subsidies for areas categorized as Band A feeders on April 3, 2024, which initially set the monthly electricity subsidy at ₦140.7 billion.

In response to these changes, NERC approved an electricity tariff hike for consumers enjoying at least 20 hours of electricity daily, raising their tariff to ₦225 per kilowatt-hour. This decision has sparked widespread outcry among Nigerians, including labor unions, educational institutions, and health facilities, whose electricity bills have tripled following the subsidy removal.

In May, when the subsidy figure dropped to ₦102.30 billion, the government reduced the Band A tariff to ₦206.80/kWh. However, the tariff was increased again to ₦209/kWh in early July as the subsidy rose to ₦158 billion in June. During this period, the NERC adjusted the dollar exchange rate to ₦1,494.1 in July, ₦1,564.3 in August, and ₦1,601.5 in September, reflecting the rising cost of power generation in Nigeria.

The benchmark gas-to-power price remains at $2.42/Million British Thermal Units, based on the established benchmark price by the Nigerian Midstream and Downstream Petroleum Regulatory Authority, in line with Section 167 of the Petroleum Industry Act 2021. This situation, coupled with the country's inflation rate of 32.15 percent in August 2024, has fueled speculations about another potential tariff increase in the October Multi-Year Tariff Order unless the cost of power generation decreases.