Despite mounting financial pressures and an outstanding ₦4.7tn debt to power generation companies (GenCos), the Federal Government of Nigeria spent a staggering ₦536.4bn on electricity subsidies in the first quarter of 2025 alone, according to the latest report by the Nigerian Electricity Regulatory Commission (NERC).
The Q1 figure marks a ₦64.7bn rise from the ₦471.69bn recorded in Q4 2024 and accounts for 59.16% of the total invoice presented to electricity distribution companies (DisCos) by the Nigerian Bulk Electricity Trading Plc (NBET). This subsidy burden continues to widen, even as Nigeria battles with insufficient electricity supply and unstable tariffs.
NERC attributed the surge in subsidy obligations to the Federal Government’s policy of maintaining non-cost-reflective tariffs. “The increase is a result of the FGN’s policy to freeze allowed tariffs paid by customers despite rising cost-reflective tariffs,” the Commission stated.
Currently, the government covers the difference between what DisCos are allowed to charge and the actual cost of power, applying the subsidy specifically to generation costs. The subsidy is channeled through NBET and remitted to GenCos after the Federal Ministry of Finance processes the payments.
However, industry stakeholders warn that despite the structured DisCo Remittance Obligation (DRO) framework — introduced in January 2024 to replace the previous Minimum Remittance Obligation scheme — payments to GenCos remain delayed and partial, hindering their ability to sustain operations.
In Q1 2025, DisCos were billed ₦370.36bn in DRO-adjusted invoices and remitted ₦354.77bn, representing a 95.79% remittance rate — an improvement from Q4 2024’s 93.26%. However, this figure reflects payment against the subsidized cost, not the actual full invoice value.
Among the best-performing DisCos in terms of NBET remittance were Benin, Eko, Ibadan, Ikeja, Kano, Port Harcourt, and Yola, which recorded 100% remittance. Abuja and Enugu followed closely with 98.43% and 99.27%, respectively. In stark contrast, Kaduna DisCo posted the lowest remittance at 37.77%.
Remittances to the Market Operator (MO) also improved, with DisCos paying ₦59.49bn of a ₦61.76bn invoice — a 96.32% performance. Kano and Kaduna notably improved their remittance levels by over 35 percentage points compared to the previous quarter.
Despite subsidy payments and improved DisCo remittances, GenCos continue to suffer from delayed payments. The promise by the Ministry of Power that President Bola Tinubu would engage directly with GenCos remains unfulfilled more than two months later.
Although the President’s Special Adviser on Energy, Olu Verheijen, had assured that ₦2tn would be paid to GenCos by the end of Q2 2025, sources within the industry confirmed that no formal meetings or disbursements have occurred.
Minister of Power, Adebayo Adelabu, via his media aide Bolaji Tunji, maintained that arrangements were still being made to facilitate the meeting.
Experts have raised concerns about the sustainability of the electricity subsidy regime. They warn that the continuous accumulation of government debt to GenCos, coupled with frozen tariffs, may cripple investment in power generation and distribution infrastructure.
Energy analyst, Adetola Ayeni, told The Punch: “Unless the government decisively addresses cost-reflective tariffs and clears GenCo arrears, the entire value chain will continue to operate under financial duress. This is not a model that can survive long-term.”
As Nigeria grapples with rising inflation, fuel subsidy removal, and increasing electricity demand, the power sector’s woes risk deepening unless structural reforms are urgently implemented.