Federal Government’s electricity subsidy obligations to distribution companies (DisCos) have surged to N982.4bn as of May 2025, rising by N5.3bn from January’s figure. This represents a 2.7 per cent increase in just five months, reflecting growing financial strain in the Nigerian power sector and the unsustainable burden of current subsidy interventions.
Data obtained from the Nigerian Electricity Regulatory Commission (NERC) via the monthly Multi-Year Tariff Orders (MYTO) shows that subsidy payments declined slightly in February and March before sharply increasing in April and May. Specifically, payments dropped from N196.44bn in January to N193.09bn in February and N192.7bn in March. However, by April it rose to N198.42bn and reached N201.75bn in May—indicating a sharp reversal of earlier reductions.
The increase in subsidy payments has been attributed to higher electricity generation costs and ongoing instability in foreign exchange rates. These economic pressures are pushing the government to cover the gap between actual cost-reflective tariffs and the lower charges paid by customers in Bands B to E.
While Band A consumers—those with premium service—pay over N210 per kilowatt-hour, the average Nigerian in Bands B to E pays about N118/kWh. The government subsidises the balance, incurring monthly deficits across all DisCos.
In May alone, Ibadan DisCo will receive N24.59bn, Abuja N28.99bn, Ikeja N27.85bn, Eko N23.45bn, and Port Harcourt N14.94bn in subsidies. Smaller DisCos like Jos, Yola, Benin, Enugu, Kano, and Kaduna are also receiving subsidies ranging from N8bn to N16bn monthly.
This comes amid growing uncertainty around federal efforts to resolve over N4tn owed to power-generating companies (GenCos). Power Minister Adebayo Adelabu recently proposed an emergency meeting between President Bola Tinubu and GenCo executives to resolve the liquidity crisis. However, sources say the meeting is unlikely to take place before the Eid holidays, and no date has been communicated.
Despite earlier commitments, there has been no disbursement toward the outstanding debt, which includes N2tn for electricity supplied in 2024 and N1.9tn in legacy debts. The minister had previously promised a phased payment structure involving upfront cash disbursements and promissory notes over six months.
A GenCo source revealed frustrations with the delay: “We’ve been discussing this since 2023 and keep hearing that payments will be made ‘very soon’. Two years later, ‘very soon’ has no meaning.”
The Senate Committee on Power recently expressed concern over the growing debt profile, noting that tariff shortfalls alone amount to a government obligation of roughly N200bn monthly. As of May, this has accumulated to nearly N800bn without a single payment made to GenCos this year.
The delay in resolving these payments raises red flags about the sustainability of Nigeria’s power infrastructure, with analysts warning of potential blackouts or service disruptions if power firms can no longer afford to maintain operations.
Experts are now calling for a fundamental overhaul of Nigeria’s electricity subsidy framework and payment system to address the root causes of inefficiency. They argue that relying on government subsidies without effective tariff reforms or accountability mechanisms will only worsen the sector’s financial health.
Without decisive action, the government may be forced to either deregulate the sector completely—pushing tariffs to cost-reflective levels—or risk a total collapse of power supply in parts of the country.