Despite successive tariff adjustments aimed at cost recovery, the Federal Government incurred an electricity subsidy bill of ₦1.98 trillion between October 2024 and September 2025, according to the latest data from the Nigerian Electricity Regulatory Commission (NERC).
Quarterly reports released by the regulator reveal that the government continued to bridge the gap between approved tariffs and the actual cost of power generation and distribution.
A breakdown of the subsidy expenditure shows a burden of ₦471.69 billion in the fourth quarter of 2024, rising to ₦536.4 billion in the first quarter of 2025. While the figure dipped slightly to ₦514.35 billion in the second quarter, it further declined to ₦458.75 billion in the third quarter, culminating in a total of ₦1.98 trillion for the 12-month period.
In its assessment, NERC attributed the sustained subsidy to the fact that end-user tariffs for most customer categories remain below cost-reflective levels.
The regulator noted that this shortfall persisted despite the April 2024 tariff hike for Band A customers, those enjoying a minimum of 20 hours of daily supply which was intended to eliminate subsidies for that segment.
NERC explained that the Federal Government covers this deficit through tariff subsidies applied at the source, primarily by offsetting the payment obligations of Electricity Distribution Companies (DisCos) to the Nigerian Bulk Electricity Trading Plc (NBET).
This significant fiscal burden comes amidst severe liquidity challenges in the sector, with the Federal Government grappling with over ₦4 trillion in outstanding debts owed to Electricity Generation Companies (GenCos). These arrears continue to threaten the financial viability of the entire value chain.
Minister of Power, Adebayo Adelabu, has frequently described the current subsidy regime as unsustainable, advocating for a shift towards targeted support for vulnerable households rather than a blanket subsidy.
Similarly, industry analysts have urged the government to implement a structured exit plan to restore market confidence.
On the third-quarter subsidy decline, NERC clarified that the reduction was not due to tariff changes but rather a result of lower energy offtake by DisCos and a marginal drop in generation costs.
The regulator also highlighted that despite modest improvements in billing and collection, DisCos continue to suffer significant revenue leakages due to energy theft, metering gaps, and weak commercial controls, keeping the sector’s reliance on subsidies elevated.