The Federal Government spent about N1.98tn on electricity subsidies over a 12-month period between October 2024 and September 2025, even as it struggles to settle more than N4tn owed to power generation companies.
Data from quarterly reports released by the Nigerian Electricity Regulatory Commission (NERC) show that subsidy costs remain high due to electricity tariffs staying below cost-reflective levels. The government incurred N471.69bn in subsidies in the fourth quarter of 2024, N536.4bn in the first quarter of 2025, N514.35bn in the second quarter, and N458.75bn in the third quarter of 2025.
According to NERC, the subsidy gap arises because government covers the difference between approved tariffs and the actual cost of electricity generation. Despite the Band A tariff adjustments introduced in April 2024, the subsidy burden has persisted. The Minister of Power, Adebayo Adelabu, has repeatedly described the subsidy regime as unsustainable, advocating a more targeted approach focused on vulnerable consumers.
NERC explained that subsidies are applied at source through Distribution Companies’ (DisCos) payment obligations to the Nigerian Bulk Electricity Trading Plc (NBET), under the DisCo Remittance Obligation (DRO) framework. This system replaced the Minimum Remittance Obligation in January 2024 to prevent subsidy debts from weighing down DisCos’ balance sheets and hindering investment.
The regulator said the subsidy accounted for 58.63 per cent of total generation invoices in the third quarter of 2025, a slight decline from the previous quarter, driven by lower energy offtake and marginal reductions in generation costs.
In Q3 2025, DisCos recorded a remittance rate of 95.23 per cent to NBET, paying N308.25bn out of a DRO-adjusted invoice of N323.70bn. Most DisCos met their obligations fully, although Kano, Benin, Jos, and Kaduna DisCos recorded shortfalls. Remittances to the Market Operator stood at 95.13 per cent for the quarter.
Despite these improvements, billing and collection challenges persist. Between Q2 and Q3 2025, DisCos recorded combined billing losses of N315.17bn, largely due to energy theft, poor metering, and weak commercial controls. In Q3, billing efficiency stood at 82.69 per cent, while collection efficiency improved to 80.70 per cent.
NERC noted that aggregate technical, commercial, and collection (ATC&C) losses remained high at 33.27 per cent, exceeding the 2025 target of 20.54 per cent. Only Eko and Ikeja DisCos met their loss reduction targets, while Kaduna DisCo recorded the worst performance.
Power sector stakeholders continue to call for the removal of electricity subsidies to address liquidity challenges. The convener of PowerUp Nigeria, Adetayo Adegbemle, described the subsidy regime as unsustainable, arguing that political considerations have delayed reforms. He urged the government to explore alternatives such as the Power Consumer Assistance Fund provided for in the Electricity Act.
Consumer groups have also criticised the service-based tariff regime. The Nigeria Electricity Consumers Advocacy Network (NECAN) said recent tariff adjustments have failed to reduce subsidies and instead worsened inefficiencies. NECAN’s National Secretary, Uket Obonga, warned that DisCos continue to collect revenues despite poor supply, questioning the effectiveness of the Band A tariff policy.
Obonga also raised concerns about the Federal Government’s N4tn electricity bond, issued to address legacy debts, saying there is still little clarity on its impact and whether it has attracted sufficient investor interest.
Overall, the NERC report highlights that while there have been modest gains in remittance and efficiency, electricity subsidies remain a major fiscal burden, with deep-seated structural issues still affecting Nigeria’s power sector.