Amid its struggles to pay the over N4tn debt owed to power generation companies, the Federal Government incurred a total of N1.98tn in electricity subsidy obligations in 12 months, from October 2024 to September 2025.
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.
Newsmen 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 Newsmen also maintained that the government should find a way out of the burden of electricity subsidy.
NERC stated that the subsidy is applied at 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 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 per cent,” 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.”
Under the framework, the regulator said the Federal Government directly settles the subsidy component of generation costs. Under the DRO framework, NBET directly invoices the portion of GenCo costs not covered by DRO (tariff subsidy) to the Federal Ministry of Finance for immediate settlement.
On payments to NBET, the regulator said DisCos recorded a remittance rate of 95.23 per cent in Q3. The DRO-adjusted invoice from NBET to the DisCos was N323.70bn, while the total remittance made was N308.25bn, according to NERC.
It added, “Comparatively, in 2025/Q2, the DRO-adjusted invoice from NBET to DisCos was N348.66bn, and the total remittance was N333.90bn, which translated to 95.77 per cent remittance performance.”
NERC explained that most DisCos met their obligations in full, as disaggregated remittance performance of the DisCos to NBET in 2025/Q3 shows that all DisCos, except Kano (98.74 per cent), Benin (94.77 per cent), Jos (65.13 per cent), and Kaduna (40.16 per cent), achieved 100 per cent remittance performance.
The commission noted mixed performance among the defaulting DisCos on a quarter-on-quarter basis, adding, “A quarter-on-quarter analysis showed that Jos (+4.29 pp) DisCo recorded an improvement in remittance performance to NBET in 2025/Q3 compared to 2025/Q2, while Benin (-5.23 pp), Kaduna (-1.68 pp) and Kano (-1.26 pp) DisCos recorded decreases in remittance performance.”
The report showed that all other DisCos (Abuja, Eko, Enugu, Ibadan, Ikeja, Port Harcourt, and Yola) maintained 100 per cent remittance to NBET across the quarters.
On remittances to the Market Operator, the regulator said DisCos paid N73.03bn out of N76.77bn invoiced in Q3. This payment translates to 95.13 per cent remittance performance. “This represents a marginal increase when compared to the 95.07 per cent remittance performance recorded in 2025/Q2 when DisCos remitted N65.30bn out of the N68.68bn invoice issued by the MO.”
According to the commission, the disaggregated remittance performance of the DisCos to the MO shows that all the DisCos, except Jos and Kaduna, recorded 100 per cent remittance performance to the MO in the third quarter.
It further stated, “Since January 2025, only Jos and Kaduna DisCos have failed to remit 100 per cent of the MO invoice,” adding that “between 2025/Q2 and 2025/Q3, Jos recorded an increase of 6.72 pp, while Kaduna recorded a decline of 4.29 pp in their remittance performance to MO.”
Operators in the power sector have repeatedly called on the Federal Government to remove the subsidies on electricity so as to end the challenges of liquidity. Since April 2024, customers on Band A have stopped enjoying electricity subsidies.
The report further showed that total generation costs for Q3 would have stood at N782.45bn without government intervention. However, due to the subsidy, the Nigerian Bulk Electricity Trading Plc invoice payable by DisCos fell to N323.70bn.
Despite modest improvements in billing and collection efficiency, electricity distribution companies recorded combined billing losses of N315.17bn between the second and third quarters of 2025, largely due to energy theft, poor metering, and weak commercial controls.
NERC disclosed that DisCos were unable to account for N167.25bn worth of energy received at their trading points in Q2, while billing losses in Q3 stood at N147.92bn. The commission did not state the billing loss figure for the first quarter.
In Q3, the naira value of total energy offtake by all DisCos stood at N854.53bn, while energy billed amounted to N706.61bn, translating to a billing efficiency of 82.69 per cent. Although this represented an improvement of 1.08 percentage points over the 81.61 per cent recorded in Q2, DisCos still suffered significant revenue leakages.
NERC said the losses were driven largely by commercial losses, including energy theft and poor energy accounting, as well as the inability of DisCos to bill energy at the weighted average allowed tariff.
On revenue collection, DisCos generated N570.25bn out of the N706.61bn billed in Q3, resulting in a collection efficiency of 80.70 per cent, up from 76.07 per cent in the previous quarter.
However, the regulator said the weighted average aggregate technical, commercial, and collection loss across all DisCos remained high at 33.27 per cent, exceeding the 2025 MYTO target of 20.54 per cent by 12.73 percentage points.
This translated to a cumulative revenue loss of N108.75bn, despite a 4.65 percentage point improvement from the 37.92 per cent recorded in Q2. Only Eko and Ikeja Electricity Distribution Companies met their ATC&C loss targets during the quarter, while Kaduna DisCo posted the worst performance, recording an actual ATC&C loss of 71.10 per cent against a target of 21.32 per cent.
On market remittances, DisCos were billed a cumulative upstream invoice of N400.48bn in Q3, comprising N323.70bn payable to NBET and N76.77bn for transmission and administrative services owed to the Market Operator.
Out of this amount, DisCos remitted N381.29bn, leaving an outstanding balance of N19.18bn and a remittance performance of 95.21 per cent, slightly below the 95.65 per cent recorded in Q2.
However, the report highlighted weak remittances from international bilateral customers, who paid only $7.13m out of the $18.69m invoiced, representing a 38.09 per cent remittance rate. By contrast, domestic bilateral customers paid N3.19bn out of N3.64bn invoiced, achieving a stronger 87.61 per cent remittance rate.