Nigeria Spends N1.98 Trillion on Electricity Subsidy in 12 Months Despite Policy Reforms
The Federal Government incurred a total of N1.98 trillion in electricity subsidy obligations between October 2024 and September 2025, according to quarterly reports from the Nigerian Electricity Regulatory Commission (NERC).
The breakdown shows:
-
Q4 2024 (Oct–Dec): N471.69bn
-
Q1 2025: N536.4bn
-
Q2 2025: N514.35bn
-
Q3 2025: N458.75bn
NERC noted that the subsidy arises because electricity tariffs remain below cost-reflective levels, requiring the government to cover the gap between actual generation costs and what distribution companies (DisCos) can charge consumers.
Despite tariff adjustments under the Band A regime in April 2024, the subsidy burden remains high. The regulator explained that subsidies are applied at source through DisCos’ payment obligations to Nigerian Bulk Electricity Trading Plc (NBET) under the DisCo Remittance Obligation (DRO) framework, which replaced the previous Minimum Remittance Obligation system in January 2024.
Under this system, the Federal Government settles the subsidy portion of generation costs directly, while DisCos remit payments for the remainder, including transmission and administrative costs.
Q3 Performance Highlights:
-
DRO-adjusted invoice from NBET to DisCos: N323.70bn
-
Total remittance by DisCos: N308.25bn (95.23% remittance rate)
-
DisCos with incomplete remittance: Kano (98.74%), Benin (94.77%), Jos (65.13%), Kaduna (40.16%)
-
Market Operator remittance: 95.13%
The report showed billing losses of N147.92bn in Q3, down from N167.25bn in Q2, due to energy theft, poor metering, and weak commercial controls. Energy offtake totaled N854.53bn, with billing of N706.61bn, yielding an efficiency of 82.69%, up slightly from 81.61% in Q2.
Collection efficiency was 80.70%, improving from 76.07% in the previous quarter. Yet, the sector’s total technical, commercial, and collection (ATC&C) loss remains high at 33.27%, exceeding the 2025 target of 20.54%. Kaduna DisCo recorded the worst ATC&C loss at 71.10%, while Eko and Ikeja DisCos met targets.
NERC said the subsidy accounted for 58.63% of total generation invoices in Q3, down slightly from 59.6% in Q2, reflecting lower energy offtake and marginally reduced generation costs.
Expert Opinions:
-
Adetayo Adegbemle (PowerUp Nigeria): The subsidy is no longer sustainable, affecting the entire power value chain. He recommended alternative mechanisms such as the Power Consumer Assistance Fund to gradually phase out subsidies.
-
Uket Obonga (Nigeria Electricity Consumers Advocacy Network): The Band A service-based tariff policy has failed, as revenue collected by DisCos is almost equal to government subsidy payments. He accused DisCos of profiting from poor service and highlighted that unreliable supply and high tariffs have prevented industrial customers from returning to the grid.
Obonga also criticized the government’s N4 trillion electricity bond, saying its impact remains unclear and may not attract sufficient investor interest.
Despite modest improvements in remittance, billing, and collection, NERC stressed that structural inefficiencies and energy theft continue to undermine the sector, keeping the electricity subsidy burden high and unsustainable.
