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Rich Customers Top Beneficiaries of Electricity Subsidy, Says NERC

Daud Olatunji

In its recently released 2022 Market Competition Report, the Nigerian Electricity Regulatory Commission (NERC) reveals that the country’s affluent customers are the primary beneficiaries of the electricity subsidy.

According to the report, the end-user tariff subsidy in Nigeria favors the rich, as the highest-income group consumes significantly more electricity than their lower-income counterparts, consequently reaping more substantial benefits from the subsidy.

The report also highlights that the average price for electricity in Nigeria is $0.14, equivalent to N64.4 using the previous official exchange rate, per kilowatt-hour (kWh). This rate is notably lower than the average electricity tariff in most ECOWAS countries.

NERC’s findings further indicate that 79 percent of the wealthiest group and 68 percent of the high-income group have electricity connections, in contrast to the poorest and low-income groups, with connection rates of only 21 percent and 41 percent, respectively.

In conclusion, the report asserts that “The current state of the Nigerian power sector, characterized by tariff subsidies, primarily benefits the relatively wealthy, as more affluent individuals are connected and consume more electricity.”

Additionally, the report notes that Nigeria’s end-use tariff is lower than that of 11 out of the 16 ECOWAS countries, partly due to the federal government’s tariff subsidies and the comparatively lower gas prices in the country.

NERC also highlights the non-uniformity in tariffs across different Distribution Companies (DisCos), attributed to varying cost structures and operational efficiencies.

 It mentions that the highest weighted average end-user tariff shifted from Enugu DisCo in 2019 to Abuja DisCo in 2022, reflecting changes in operational costs.

Moreover, the report reveals a 7.95 percent growth in installed capacity within the Nigerian Electricity Supply Industry (NESI), increasing from 12,132MW in December 2015 to 13,097MW by December 2022. 

While the available capacity stood at 4,059MW in December 2022, NERC remains committed to addressing the numerous challenges within NESI to ensure continued growth in daily average generation.

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