…Power sector stakeholders have continued to call for the removal of electricity subsidies to address persistent liquidity challenges.
ABUJA, NIGERIA- The iNews Times | Despite grappling with more than ₦4tn in outstanding debts to power generation companies, the Federal Government spent ₦1.98tn on electricity subsidies over a 12-month period between October 2024 and September 2025.
This was disclosed in quarterly reports released by the Nigerian Electricity Regulatory Commission (NERC). According to the regulator, the government incurred ₦471.69bn in subsidy costs 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, bringing the total subsidy obligation for the period to ₦1.98tn.
In its latest report published on Tuesday, NERC attributed the sustained subsidy burden to electricity tariffs remaining below cost-reflective levels. The commission explained that in the absence of cost-reflective pricing, the Federal Government is required to bridge the gap between approved tariffs and actual generation costs through tariff subsidies.
The regulator noted that subsidy levels have remained elevated despite the April 2024 tariff adjustment for Band A customers. The Minister of Power, Adebayo Adelabu, has repeatedly described the subsidy regime as unsustainable, advocating a more targeted approach that would protect only low-income consumers.
NERC clarified that the subsidy is applied at source through the Discos’ payment obligations to the Nigerian Bulk Electricity Trading Plc (NBET) under the DisCo Remittance Obligation (DRO) framework. The DRO represents the portion of generation costs that DisCos are required to pay based on what their allowed tariffs can cover, while the Federal Government settles the remaining subsidy component directly.
According to the commission, the subsidy obligation in the third quarter of 2025 declined by ₦55.59bn from the previous quarter, falling from ₦514.35bn in Q2 to ₦458.75bn in Q3. Despite this reduction, the subsidy still accounted for 58.63 per cent of total generation invoices during the quarter.
NERC attributed the decline to lower energy offtake by DisCos and a slight reduction in generation costs. Energy offtake fell by 6.08 per cent, while the cost of generation declined by 0.98 per cent, even as end-user tariffs remained unchanged.
The commission noted that the DRO framework, which replaced the Minimum Remittance Obligation regime in January 2024, was introduced to prevent unpaid subsidy debts from weakening DisCos’ balance sheets and hindering their ability to raise financing for network investments.
Under the framework, NBET invoices DisCos only for the portion of generation costs covered by tariffs, while the Federal Ministry of Finance settles the subsidy component directly.
In Q3 2025, DisCos recorded a remittance rate of 95.23 per cent to NBET, paying ₦308.25bn out of a ₦323.70bn DRO-adjusted invoice. Most DisCos achieved full remittance, although Kano, Benin, Jos and Kaduna DisCos fell short. Jos DisCo recorded a modest improvement, while Benin, Kaduna and Kano experienced declines in remittance performance.
Remittances to the Market Operator also improved slightly, with DisCos paying ₦73.03bn out of ₦76.77bn invoiced in Q3, representing a 95.13 per cent remittance rate. However, Jos and Kaduna DisCos continued to underperform.
NERC further disclosed that without government intervention, total generation costs in Q3 would have reached ₦782.45bn. Due to the subsidy, the amount payable by DisCos to NBET was reduced to ₦323.70bn.
Despite modest gains in billing and collection efficiency, DisCos recorded combined billing losses of ₦315.17bn between the second and third quarters of 2025, largely due to energy theft, inadequate metering and weak commercial controls. Billing efficiency improved slightly to 82.69 per cent in Q3, while collection efficiency rose to 80.70 per cent.
However, aggregate technical, commercial and collection (ATC&C) losses remained high at 33.27 per cent, well above the 2025 MYTO target of 20.54 per cent. Only Eko and Ikeja DisCos met their ATC&C loss targets during the quarter, with Kaduna DisCo posting the weakest performance.
Power sector stakeholders have continued to call for the removal of electricity subsidies to address persistent liquidity challenges. While Band A customers have stopped benefiting from subsidies since April 2024, experts argue that the current subsidy regime continues to distort the market.
Speaking on the issue, the convener of PowerUp Nigeria, Adetayo Adegbemle, described electricity subsidies as unsustainable, warning that they undermine the entire power value chain due to government delays in meeting subsidy obligations.
Similarly, the Nigeria Electricity Consumers Advocacy Network criticised the service-based tariff policy, describing it as ineffective. The group argued that recent tariff adjustments have failed to reduce subsidy payments and have instead worsened inefficiencies, with DisCos allegedly benefiting from poor supply while continuing to collect tariffs from consumers.
