By Frontline Reporters
Amid ongoing struggles to clear over ₦4 trillion owed to power generation companies, the Federal Government incurred a total of ₦1.98 trillion in electricity subsidy obligations over a 12-month period between October 2024 and September 2025, according to quarterly reports released by the Nigerian Electricity Regulatory Commission (NERC).
The reports show that the government spent ₦471.69bn on electricity subsidies in the fourth quarter of 2024, ₦536.40bn in the first quarter of 2025, ₦514.35bn in the second quarter, and ₦458.75bn in the third quarter of 2025.
NERC explained that the subsidy burden persisted because electricity tariffs remain below cost-reflective levels. As a result, the Federal Government continues to cover the gap between approved tariffs and actual generation costs.
Despite the Band A tariff adjustment introduced in April 2024, subsidy obligations remain high. The Minister of Power, Adebayo Adelabu, has repeatedly warned that the current subsidy regime is unsustainable, advocating for a more targeted approach that supports only low-income consumers.
Experts who spoke with Frontline Reporters echoed this concern, urging the government to urgently exit the blanket subsidy framework.
How the Subsidy Works
NERC noted that electricity subsidies are applied at source through the DisCos’ payment obligations to the Nigerian Bulk Electricity Trading Plc (NBET) under the DisCo Remittance Obligation (DRO) framework, which replaced the Minimum Remittance Obligation regime in January 2024.
Under the DRO system, DisCos remit only what their allowed tariffs can cover, while the Federal Government directly settles the subsidy portion of generation costs through the Ministry of Finance.
In the third quarter of 2025, DisCos recorded a 95.23% remittance rate to NBET, paying ₦308.25bn out of a ₦323.70bn invoice. Most DisCos met their obligations fully, though Kaduna, Jos, Benin, and Kano DisCos recorded shortfalls.
Persistent Losses and Inefficiencies
Despite modest improvements in billing and collection efficiency, electricity distribution companies recorded combined billing losses of ₦315.17bn between the second and third quarters of 2025, largely due to energy theft, poor metering, and weak commercial controls.
In Q3, total energy offtake stood at ₦854.53bn, while energy billed was ₦706.61bn, translating to a billing efficiency of 82.69%. Revenue collection amounted to ₦570.25bn, representing a collection efficiency of 80.70%.
However, aggregate technical, commercial, and collection (ATC&C) losses remained high at 33.27%, far above the 2025 MYTO target of 20.54%. Only Eko and Ikeja DisCos met their loss targets during the period.
Experts and Consumers React
The convener of PowerUp Nigeria, Adetayo Adegbemle, described the electricity subsidy as unsustainable, noting that government failure to fully fund it has weakened the entire power value chain.
Similarly, the Nigeria Electricity Consumers Advocacy Network (NECAN) criticised the service-based tariff policy, describing it as ineffective and warning that tariff hikes have not reduced subsidy payments or improved supply reliability.
NECAN’s National Secretary, Uket Obonga, argued that electricity distribution companies continue to collect tariffs without delivering commensurate power supply, while industrial users remain reluctant to return to the national grid due to poor service quality.
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2026-01-03