Electricity Subsidy Nears N2tn Annually

The Federal Government spent N1.98 trillion on electricity subsidies between October 2024 and September 2025, as it struggles to settle over N4 trillion owed to power generation companies (GenCos). This is according to quarterly reports from the Nigerian Electricity Regulatory Commission (NERC), which highlighted that the subsidy burden persists due to electricity tariffs remaining below cost-reflective levels despite Band A tariff adjustments in April 2024.

NERC explained that subsidies are applied through the DisCo Remittance Obligation (DRO) framework, which allows the government to cover the gap between approved tariffs and actual generation costs. In Q3 2025 alone, the government’s subsidy obligation was N458.75bn, down from N514.35bn in Q2, due to lower energy offtake and a marginal reduction in generation costs. Most electricity distribution companies (DisCos) met their DRO obligations, though Kaduna, Jos, Benin, and Kano DisCos recorded partial remittances.

Despite improvements in billing and collection, DisCos continued to suffer significant losses. In Q3 2025, billing losses totaled N147.92bn, while aggregate technical, commercial, and collection (ATC&C) losses remained high at 33.27 percent, well above the 2025 MYTO target of 20.54 percent. Collection efficiency improved slightly to 80.70 percent, but poor metering, energy theft, and weak commercial controls continue to undermine revenue generation.

Industry experts have warned that the electricity subsidy is unsustainable. PowerUp Nigeria convener Adetayo Adegbemle described the policy as a drain on the entire value chain and urged alternatives, including the Power Consumer Assistance Fund, to reduce government exposure. Similarly, Nigeria Electricity Consumers Advocacy Network (NECAN) Secretary Uket Obonga criticized the service-based tariff regime, noting that DisCos benefit from poor electricity supply while continuing to collect revenue from consumers.

The reports underscore the urgent need for structural reforms in Nigeria’s power sector, including the removal of subsidies, improved billing systems, and the return of industrial consumers to the grid. NERC’s latest data also showed that while the government’s intervention reduced generation costs for DisCos to N323.70bn in Q3, revenue leakages and subsidy dependence remain significant challenges for long-term sector stability. The issue has also been highlighted by VOP TV, emphasizing the growing public debate on electricity reform in Nigeria.