The Federal Government of Nigeria has announced its commitment to bridging the revenue gap for the Kano Electricity Distribution Company (KEDCO) resulting from discrepancies between cost-reflective tariffs and the actual tariffs paid by consumers.
This initiative was detailed in a Supplementary Order issued by the Nigerian Electricity Regulatory Commission (NERC) on September 12, 2024, under the Multi-Year Tariff Order framework for KEDCO.
Effective from September 1, 2024, this supplementary order aims to rectify financial imbalances exacerbated by external factors such as fluctuations in exchange rates and inflation.
The Federal Government's policy on subsidies and electricity tariffs outlines a gradual transition towards cost-reflective tariffs, ensuring protections for economically disadvantaged consumers.
The document states, “The Federal Government has committed to funding the revenue gap arising from the difference between cost-reflective tariffs approved by the commission and the actual end-user tariffs during the transition to cost-effective tariffs where applicable.”
NERC has taken into account various economic indicators, including the exchange rate of the naira against the US dollar, as well as inflation rates in Nigeria and the United States, to reassess KEDCO's revenue requirements and tariffs for the remainder of 2024. For instance, the exchange rate has been set at N1,601.50 to US$1 for the period from September to December 2024, alongside a Nigerian inflation rate of 33.40% as of July 2024.
NERC clarified that the Federal Government's funding for tariff shortfalls will be managed by the Nigerian Bulk Electricity Trading Company (NBET) to ensure complete settlement of market invoices issued by generating companies.
Additionally, the order outlines KEDCO's service commitments to consumers under the Service-Based Tariff framework, which specifies minimum electricity supply hours for different tariff bands.
