The Federal Government incurred a gross electricity tariff subsidy obligation of N1.928 trillion in 2025, according to the Nigerian Electricity Regulatory Commission (NERC).
The figure represents the amount required to bridge the gap between cost-reflective electricity tariffs and the lower rates approved for customers.
According to NERC’s 2025 industry report, the subsidy obligation represented 57.44 per cent of the total Nigerian Bulk Electricity Trading (NBET) invoice, averaging about N160.69 billion per month.
Subsidy Burden Declined Slightly
Despite the huge financial burden, the 2025 figure was slightly lower than the N1.949 trillion recorded in 2024.
NERC reported that the subsidy obligation stood at:
– N536.40 billion in the first quarter
– N514.36 billion in the second quarter
– N458.76 billion in the third quarter
– N418.79 billion in the fourth quarter
The quarterly figures show a gradual decline in the subsidy obligation as the year progressed.
Why Electricity Subsidy Remained High
NERC attributed the subsidy burden largely to the Federal Government’s policy of maintaining approved customer tariffs even as the cost of supplying electricity increased.
Because tariffs paid by many consumers remained below cost-reflective levels, the government was required to absorb the difference.
The commission said the gradual decline in the subsidy obligation was partly driven by lower energy off-take by electricity distribution companies (DisCos) and a higher proportion of electricity being allocated to Band A customers.
More Electricity Allocated to Band A
NERC disclosed that the share of energy allocated to Band A customers increased from 40 per cent to 45 per cent in the fourth quarter of 2025.
Band A customers are those expected to receive significantly longer daily electricity supply than customers in the lower service bands.
The shift in energy allocation formed part of efforts to improve the commercial performance of electricity distribution and encourage better service delivery.
DisCos Billed N2.99trn, Collected N2.32trn
NERC also reported significant collection challenges within the distribution segment of the electricity market.
The 11 DisCos collectively billed customers N2.988 trillion in 2025 but collected only N2.319 trillion, leaving an outstanding balance of approximately N669.49 billion.
The resulting collection efficiency stood at 77.60 per cent.
Eko DisCo recorded the highest collection efficiency at 87.90 per cent, closely followed by Ikeja DisCo at 87.89 per cent, while Kaduna DisCo recorded the lowest at 45.68 per cent.
Financial Pressure on Power Sector
The combination of tariff subsidies and collection inefficiencies continues to place pressure on the finances of Nigeria’s electricity market.
NERC warned that weak liquidity in the sector could limit the ability of market participants to invest in infrastructure and expand electricity supply.
The latest figures therefore highlight the continuing challenge of balancing affordable electricity tariffs for consumers with the need to ensure that electricity providers receive enough revenue to operate sustainably.
With the government absorbing more than N1.9 trillion in tariff shortfalls in 2025, the future of electricity pricing and subsidy policy remains a major issue for Nigeria’s power sector.