Nigeria’s federal government spent nearly US$1.28 billion on electricity subsidies over a 12-month period as it struggled to cover debts owed to power generation companies, official data showed.
According to quarterly reports from the Nigerian Electricity Regulatory Commission (NERC), the government incurred US$306 million in the fourth quarter of 2024, US$348 million in the first quarter of 2025, US$334 million in the second quarter, and US$298 million in the third quarter. The total for the period from October 2024 to September 2025 came to US$1.28 billion.
The subsidies cover the gap between the cost of electricity generation and the tariffs paid by consumers, which remain below cost-reflective levels. NERC said the burden persists despite tariff adjustments for Band A customers, who receive longer hours of supply, implemented in April 2024.
“The government undertook to cover the resultant gap between the cost-reflective and allowed tariff in the form of tariff subsidies,” NERC said in its report.
The regulator noted that electricity distribution companies, or DisCos, remain responsible for settling other market invoices, including transmission and administrative costs. Under the DisCo Remittance Obligation (DRO) framework, introduced in January 2024, the federal government directly pays the subsidy portion to generation companies, while DisCos pay 100 percent of their remaining obligations.
More Read
In the third quarter of 2025, DisCos remitted US$200 million of a US$210 million invoice from the Nigerian Bulk Electricity Trading Plc (NBET), achieving a remittance rate of 95.23 percent. Most distribution companies met their obligations fully, though Kano, Benin, Jos and Kaduna lagged behind.
Remittances to the Market Operator, which handles administrative costs, also improved slightly to US$48 million out of US$50 million, or 95.13 percent, with only Jos and Kaduna failing to pay in full.
Despite these gains, liquidity challenges remain. Total generation costs for the third quarter would have stood at US$508 million without government intervention, but the subsidy reduced the amount payable by DisCos to US$210 million.
More Read
Revenue leakages from energy theft, poor metering and weak commercial controls continue to strain the sector. Combined billing losses across the second and third quarters of 2025 reached US$205 million. In the third quarter, the value of energy supplied was US$555 million, but only US$459 million was billed, resulting in a billing efficiency of 82.69 percent a modest improvement over the previous quarter.
Power sector operators have repeatedly called for the removal of electricity subsidies to restore liquidity and enable investment in distribution networks. Minister of Power Adebayo Adelabu has described the subsidy system as unsustainable, suggesting that support should be targeted toward vulnerable households.
While NERC reports some improvements in billing and remittance performance, analysts warn that without deeper reforms, the financial sustainability of Nigeria’s power sector remains at risk, even as government support continues to cost the treasury more than a billion dollars each year.
