Harrison EDEH
AS the Nigerian government fine-tunes plans over its removal,the electricity subsidy bill surged to ₦1.93 trillion in 2025, highlighting the growing financial cost of keeping customer tariffs below the actual cost of supplying electricity, even as the power sector recorded significant improvements in grid stability.
The figure, contained in the Nigerian Electricity Regulatory Commission’s (NERC) 2025 Annual Report & Accounts, represents 57.44 per cent of the total electricity generation invoice from the Nigerian Bulk Electricity Trading Plc (NBET).
The government’s subsidy obligation averaged ₦160.69 billion every month during the year.
NERC attributed the huge subsidy bill largely to the Federal Government’s decision to freeze electricity tariffs across customer bands throughout 2025, despite increases in the cost of generating and supplying electricity.
“This subsidy obligation of the FGN is largely attributable to the FGN’s policy to freeze allowed tariffs paid by customers despite the increase in cost-reflective tariffs,” NERC said.
The cost-reflective tariff is the amount electricity distributors would need to charge to cover the actual cost of supplying power, including changes in inflation, foreign exchange rates and gas prices.
With customer tariffs frozen at July 2024 levels, the gap between what consumers paid and the actual cost of electricity had to be covered by the government.
A cursory review of the report by the Advocate Times shows that the subsidy burden remained high despite falling through the year.
NERC reported quarterly obligations of ₦536.40 billion in the first quarter, ₦514.36 billion in the second, ₦458.76 billion in the third, and ₦418.79 billion in the fourth quarter.
The commission said the decline was partly driven by lower electricity offtake by distribution companies and a strategic increase in the allocation of electricity to Band A customers from 40 per cent to 45 per cent.
Band A customers pay higher tariffs, allowing a greater share of the cost of their electricity to be recovered.
But the subsidy problem is also linked to deep weaknesses in the distribution end of the electricity market.
Across the industry, distribution companies received electricity worth ₦3.68 trillion but billed customers only ₦2.99 trillion, leaving a ₦694.80 billion gap. Industry-wide billing efficiency stood at 81.14 per cent.
The gap was particularly wide among some DisCos. Eko recorded the highest billing efficiency at 95.41 per cent, followed by Ikeja at 90.77 per cent and Kano at 90.26 per cent. Yola recorded the weakest performance at 60.99 per cent, while Kaduna stood at 61.56 per cent.
The sector also continued to lose large amounts of electricity through technical, commercial, and collection losses. Average losses across the 11 DisCos stood at 37.03 per cent, compared with an efficiency target of 20.54 per cent.
Eko was the only DisCo to beat its regulatory target, recording losses of 16.13 per cent against a target of 16.88 per cent. Kaduna recorded the worst performance, with losses of 71.88 per cent against a target of 21.32 per cent.
The commercial weakness was reflected in the ability of DisCos to remit payments for electricity purchased from the market. While Eko, Ikeja and Port Harcourt achieved 100 per cent remittance to NBET, Kaduna remitted only 40.13 per cent.
Collection efficiency was also weak in some parts of the market. Eko recorded 87.90 per cent and Ikeja 87.89 per cent, compared with just 45.68 per cent for Kaduna and 46.11 per cent for Jos.
Metering remains another major obstacle to improving revenue collection and reducing the need for government support. Only 57.27 per cent of active registered customers, or 6.97 million of 12.16 million customers, were metered by the end of 2025.
The disparity was again significant. Ikeja and Eko recorded metering rates of 86.40 per cent and 85.87 per cent, respectively, while Yola and Jos remained at 30.80 per cent and 31.43 per cent.
The subsidy burden comes against the backdrop of improved technical performance in the power system. Total electricity generation reached 39,208.68 GWh in 2025, while grid collapses fell to two from nine in 2024. One was a full collapse and the other a partial collapse, with both incidents restored within about 30 minutes.
Hydropower generated 12,804.18 GWh, accounting for 32.66 per cent of total generation. However, NERC said Shiroro, Jebba and Zungeru recorded dispatch rates below the regulatory minimum of 90 per cent because of grid conditions.
“Shiroro_1 (75.54%), Jebba_1 (74.20%), and Zungeru_1 (63.57%) hydropower plants recorded dispatch rates below the 90% minimum threshold,” the report said.
The 2025 figures therefore expose a fundamental imbalance in Nigeria’s electricity market: while the physical performance of the grid improved, the financial model remained heavily dependent on government support.
The ₦1.93 trillion subsidy bill means the government absorbed more than half of the total NBET generation invoice, while DisCos simultaneously struggled with billing, collection, metering, and electricity losses.
Without significant improvement in the ability of DisCos to meter customers, reduce losses, bill accurately, and collect payments, improvements in generation and grid stability could continue to come with a substantial fiscal cost to the government.
For Nigeria’s power sector, the challenge is increasingly not only how to generate and transmit more electricity, but how to make the electricity market financially sustainable without relying on a multi-trillion-naira government subsidy.
