Nigeria’s power sector recorded a subsidy burden of N418.79 billion in the fourth quarter of 2025, even as electricity distribution companies (DisCos) posted a strong remittance performance of 93.04%.
This is according to the latest report released by the Nigerian Electricity Regulatory Commission (NERC).
The figures highlight the continued dependence on government support to sustain the electricity supply amid non-cost-reflective tariffs.
The report reflects a mixed performance across the sector, with improved remittance levels coexisting alongside a significant subsidy burden.
What the report is saying
NERC data shows a decline in subsidy obligations alongside strong remittance performance by DisCos.
- The Federal Government’s subsidy stood at N418.79 billion in Q4 2025.
- This represents a decrease of N39.96 billion from N458.75 billion recorded in Q3 2025.
- “The government subsidy accounted for 52.30% of the total GenCo invoice, which is a 6.60pp decrease compared to 2025/Q3, when the subsidy accounted for 58.63% of the total GenCo invoice.”
- “The key driver of this reduction is the increase in energy allocated to Band A customers from 40% to 45% to reflect the strategic direction of the government to improve the quality of supply to consumers,” NERC noted.
Despite the reduction, subsidies remain a major component of the electricity market structure.
Get up to speed
President Bola Ahmed Tinubu, in June 2023, assented to the Electricity Act 2023, a landmark legislation originally passed by the National Assembly in July 2022.
The new Act replaces the Electric Power Sector Reform Act 2005 and introduces a comprehensive framework to guide the post-privatisation phase of the Nigerian Electricity Supply Industry (NESI). It is also designed to attract increased private sector investment into the power sector.
A major feature of the law is the removal of electricity from the Exclusive Legislative List, effectively decentralising the sector. This reform allows state governments, private companies, and individuals to generate, transmit, and distribute electricity independently, thereby breaking the long-standing monopoly at the national level.
The Act is expected to drive competition, improve service delivery, and expand access to electricity across the country by enabling subnational and private participation in power infrastructure development.
However, despite these structural reforms, Nigeria’s electricity sector continues to grapple with deep-rooted financial challenges, particularly around pricing and cost recovery.
For years, the sector has relied heavily on government subsidies due to persistent tariff shortfalls:
- Electricity tariffs have remained below cost-reflective levels, creating significant revenue gaps across the value chain.
- The Federal Government has consistently intervened to cover these shortfalls, ensuring the continued operation of the market.
- Ongoing reforms have sought to balance improved cost recovery with the need to keep electricity affordable for consumers.
More Insights
Performance across the 11 DisCos varied during the quarter.
- Abuja, Eko, Enugu, Ikeja, and Port Harcourt DisCos recorded 100 per cent remittance.
- Yola (99.42 per cent), Benin (98.30 per cent), and Ibadan (95.58 per cent) also showed strong performance.
- Kano (75.14 per cent), Jos (49.80 per cent), and Kaduna (40.73 per cent) recorded significant shortfalls.
- Quarter-on-quarter, Benin and Kaduna improved slightly, while Kano and Jos recorded the steepest declines.
NERC attributed the reduction in subsidy partly to increased energy allocation to Band A customers, which rose from 40 per cent to 45 per cent.
What you should know
In February, the Federal Government announced plans to share the electricity subsidy costs with other tiers of government, like the state and local governments, from 2026, thereby ending the burden of carrying the subsidy in the power sector.
FG said the president wants electricity subsidy costs to be explicit, practical and transparent, warning that no level of government should carry hidden or unpaid obligations.
