Annual Electricity Subsidy Edges Close To N2tn

The Federal Government incurred N1.98tn in electricity subsidy obligations between October 2024 and September 2025, as it continued to struggle with over N4tn in debt owed to power generation companies, according to quarterly reports by the Nigerian Electricity Regulatory Commission (NERC).

The fourth-quarter 2024 subsidy stood at N471.69bn, rising to N536.4bn in Q1 2025 and N514.35bn in Q2 2025. The latest NERC report showed that in Q3 2025, the government’s electricity subsidy burden amounted to N458.75bn, bringing the 12-month total to N1.98tn. The subsidy remains necessary as electricity tariffs are still below cost-reflective levels.

NERC explained that, in the absence of cost-reflective tariffs, the government covers the gap between actual generation costs and approved tariffs through subsidy payments. Subsidy payments are applied at source via the DisCos’ payment obligations to the Nigerian Bulk Electricity Trading Plc (NBET), under the DisCo Remittance Obligation (DRO) framework introduced in January 2024 to replace the Minimum Remittance Obligation regime. This framework ensures DisCos meet generation cost obligations while the Federal Government directly settles the subsidy portion.

In Q3 2025, DisCos achieved a 95.23 per cent remittance rate to NBET, slightly down from 95.77 per cent in Q2. While most DisCos met 100 per cent of their obligations, Kano, Benin, Jos, and Kaduna fell short, with Kaduna performing the weakest at 40.16 per cent. On payments to the Market Operator, DisCos recorded 95.13 per cent remittance in Q3, slightly up from 95.07 per cent in the previous quarter.

Despite marginal improvements in billing and collections, DisCos recorded combined billing losses of N315.17bn between Q2 and Q3, primarily due to energy theft, poor metering, and weak commercial controls. Energy offtake for Q3 was valued at N854.53bn, but only N706.61bn was billed, yielding a billing efficiency of 82.69 per cent. Revenue collection was N570.25bn, giving a collection efficiency of 80.70 per cent, an improvement from 76.07 per cent in Q2.

The weighted aggregate technical, commercial, and collection loss remained high at 33.27 per cent, exceeding the 2025 MYTO target of 20.54 per cent. Only Eko and Ikeja DisCos met the target, while Kaduna recorded the highest loss at 71.10 per cent.

Experts argue that the electricity subsidy is no longer sustainable. Adetayo Adegbemle, convener of PowerUp Nigeria, said the subsidy affects the entire value chain, as the government has failed to meet its obligations, and urged the development of alternative support mechanisms such as the Power Consumer Assistance Fund.

Consumers’ advocates also criticized the service-based tariff policy. Uket Obonga, National Secretary of the Nigeria Electricity Consumers Advocacy Network (NECAN), described the Band A tariff regime as ineffective, noting that revenue collected by DisCos is now nearly equal to government subsidy payments. He further raised concerns about poor electricity supply, high tariffs, and limited industrial customer participation, arguing these factors have undermined the original objective of the tariff structure.

Obonga also questioned the impact of the Federal Government’s N4tn electricity bond, issued to address legacy debts, noting a lack of transparency and clarity on its effectiveness in stabilizing the sector.