The Federal Government incurred a total of N1.98tn in electricity subsidy obligations in 12 months, from October 2024 to September 2025, amid its struggles to pay the over N4tn debt owed to power generation companies.
This was according to the quarterly reports released by the Nigerian Electricity Regulatory Commission. In the fourth quarter of 2024, covering October to December, the electricity subsidy incurred by the government was N471.69bn. It was N536.4bn in the first quarter of 2025 and N514.35bn in the second quarter of last year.
The latest report from NERC released on Tuesday showed that the Federal Government incurred a power subsidy burden of N458.75bn in the third quarter of 2025 as electricity tariffs remained below cost-reflective levels, making a total of N1.98tn in the 12-month period, from October 2024 to September 2025.
NERC stated in its reports that in the absence of cost-reflective tariffs, the government undertook to cover the resultant gap between the cost-reflective and allowed tariff in the form of tariff subsidies.
The PUNCH observed that the subsidy burden remains high despite the Band A tariff adjustments of April 2024. Recall that the Minister of Power, Adebayo Adelabu, has repeatedly pointed out that the electricity subsidy was no longer sustainable, proposing a subsidy arrangement that would cover only the poor.
Experts who spoke with The PUNCH also maintained that the government should find a way out of the burden of electricity subsidy.
NERC stated that the subsidy is applied at the source through the DisCos’ payment obligations to the Nigerian Bulk Electricity Trading Plc. It stated that for ease of administration, the subsidy is only applied to the generation cost payable by DisCos to NBET at the source in the form of a DisCo’s Remittance Obligation.
According to the regulator, the DRO represents the total GenCo invoice that is billed to the DisCos by NBET based on what the allowed DisCo tariffs can cover. NERC added that DisCos are still required to fully meet other market invoices.
“DisCos are expected to remit 100 per cent of the invoices received from the MO for transmission and administrative service costs.” It disclosed that the subsidy obligation in Q3 amounted to N458.75bn, though it represented a decline from the previous quarter.
“Due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N458.75bn; this represents a N55.59bn reduction in FGN subsidy compared to 2025/Q2 (N514.35bn),” it said.
The commission said the subsidy accounted for over half of total generation invoices, stating, “The subsidy obligation of the government decreased in naira terms and accounted for 58.63 per cent of the total GenCo invoice, which is a 0.97 pp decrease compared to 2025/Q2 when the subsidy accounted for 59.60 per cent of the total GenCo invoice.”
According to NERC, the reduction was driven by lower energy offtake and a marginal decline in generation cost. “This is because while the allowed end-user tariffs remained unchanged across the quarters, there was a 6.08 per cent decrease in energy offtake by the DisCos during the quarter, as well as a reduction in actual generation cost (N/kWh) by 0.98 percent,” the report added.
The commission noted that the DRO framework replaced the Minimum Remittance Obligation regime in January 2024, and DisCos are expected to pay 100 per cent of their DROs.
Explaining the reason for the policy shift, NERC said, “The transition to the DRO regime was necessitated by the risk of unpaid tariff subsidy debts encumbering the balance sheets of the DisCos, thereby preventing them from raising finance to undertake critical investments in their distribution network.”
