The Federal Government incurred N1.98 trillion in electricity subsidy obligations between October 2024 and September 2025, despite ongoing difficulties in settling over N4 trillion owed to power generation companies, according to the .
Quarterly reports released by the regulator show that the government spent N471.69 billion on subsidies in the fourth quarter of 2024, followed by N536.4 billion in the first quarter of 2025 and N514.35 billion in the second quarter. In the third quarter of 2025 alone, subsidy obligations stood at N458.75 billion.
NERC said the subsidy burden persisted because electricity tariffs remained below cost-reflective levels, requiring the government to cover the gap between the actual cost of power generation and the approved tariffs paid by consumers.
The regulator noted that the subsidy remained high despite the Band A tariff adjustments introduced in April 2024. The Minister of Power, Adebayo Adelabu, has repeatedly described the current subsidy regime as unsustainable, advocating a targeted system that supports only low-income consumers.
Under the current framework, NERC explained that subsidies are applied at source through distribution companies’ (DisCos) payment obligations to the Nigerian Bulk Electricity Trading Plc (NBET). This is done via the DisCos’ Remittance Obligation (DRO), which reflects the portion of generation costs covered by approved tariffs.
According to the commission, DisCos are still required to fully pay other market invoices, including transmission and administrative service costs. “DisCos are expected to remit 100 per cent of the invoices received from the Market Operator for transmission and administrative services,” NERC stated.
While subsidy costs declined slightly in the third quarter, NERC said they still accounted for 58.63 per cent of total generation invoices, down marginally from 59.60 per cent in the previous quarter. The reduction was attributed to lower energy offtake by DisCos and a slight drop in generation costs.
NERC added that the DRO framework, which replaced the Minimum Remittance Obligation regime in January 2024, was introduced to prevent unpaid subsidy debts from weakening DisCos’ balance sheets and limiting their ability to attract funding for network upgrades.
Energy experts continue to warn that without cost-reflective tariffs and broader sector reforms, electricity subsidies will remain a major strain on public finances.