Federal Gov’t Incurs N471.69bn On Electricity Subsidy In Q4

The federal government is to pay a substantial N471.69 billion on electricity subsidies for the fourth quarter of 2024, according to the Nigerian Electricity Regulatory Commission (NERC). This significant expenditure represents about 57 per cent of the total generation costs for the period, resulting from the government’s decision to freeze end-user tariffs at July 2024 rates.

This was contained in the NERC Quarterly Report 2024, released yesterday.

The report also showed that the remittance performance of electricity distribution companies (DisCos) improved, reaching 92.68 per cent in Q4 2024. This marks a notable increase compared to 83.77 per cent in the previous quarter indicating better financial compliance by the DisCos. Despite these improvements, the sector continues to face challenges, including substantial subsidy obligations and ongoing liquidity issues.

The report indicated that the increase reflects a concerted effort by the DisCos to enhance their financial obligations towards the Nigerian Bulk Electricity Trading (NBET) and the Market Operator (MO), which are crucial for maintaining the stability of the electricity supply chain.

The total amount payable by DisCos in Q4 was N431.16 billion, comprising N368.94 billion for generation costs from NBET and N62.22 billion for transmission and administrative services by the MO.

Out of this, DisCos collectively remitted N399.54 billion, leaving an outstanding balance of N31.62 billion. This marks a notable recovery from previous quarters, where remittance rates had fluctuated significantly due to various operational challenges.

The report said: “The NBET invoice payable by the DisCos for 2024/Q4 was only ₦360.97 billion because the FGN has taken responsibility for ~57% (₦471.69 billion) of the total generation costs in the form of subsidies arising from the freezing of end-use customer tariffs at the rates payable in July 2024.”

NERC said local and international bilateral customers made payments during 2024/Q4 for outstanding Market Operator (MO) invoices from previous quarters.

According to the report, while “the international bilateral customers paid $2.98 million while the domestic bilateral customers paid ₦135.81 million.”

In comparison, said NERC, the total revenue collected by all DisCos in 2024/Q3 was N466.69 billion out of the N626.02 billion billed to customers, which translated to a 74.55 per cent collection efficiency.

It also said the 77.44 per cent collection efficiency recorded in 2024/Q4 is +2.89pp higher than the collection efficiency recorded in 2024/Q3 (74.55 per cent).

In terms of operational performance, the average available generation capacity saw an increase to 5,296.89MW in Q4, up from 5,100.90MW in Q3, marking a 3.84 per cent  rise. This increase is attributed to enhanced plant availability across several grid-connected power plants, with fifteen plants reporting higher generation capacities compared to the previous quarter.

However, total electricity generation experienced a slight decline, dropping by 1.70% to 9,289.95GWh in Q4 from 9,450.76GWh in Q3. The decrease was primarily due to reduced energy offtake by grid-connected customers, highlighting a disconnect between generation capacity and actual consumption.

Billing efficiency also saw positive developments, with an increase to 83.66% in Q4 from 82.15% in Q3. This improvement is indicative of better management practices among DisCos as they strive to minimise billing losses and enhance customer engagement.

Collection efficiency rose to 77.44 per cent, up by 2.89 percentage points from the previous quarter’s performance of 74.55 per cent. This suggests that DisCos are becoming more effective at collecting payments from customers, which is vital for their financial health.

Despite these improvements, the reports indicated that challenges remain evident within the sector. The Aggregate Technical, Commercial and Collection (ATC&C) losses were recorded at 35.22 per cent, which is still significantly above the target of 24.78 per cent. This indicates that while there has been progress in remittance and collection efficiency, there is still considerable room for improvement in reducing losses across the distribution network.

Moreover, customer complaints decreased by 16.13 per cent compared to Q3; however, only 29.45 per cent of these complaints were resolved successfully during the quarter. The prevalent issues continue to revolve around metering and billing discrepancies.

The report also highlighted health and safety concerns within the electricity sector, with 54 accidents reported in Q4 resulting in 26 fatalities—an alarming statistic that underscores the need for improved safety protocols within the industry.