Experts: FG tariff freeze could deepen electricity market revenue pressure

The Federal Government’s decision not to increase electricity tariffs in the immediate term could leave Nigeria’s electricity market facing a persistent revenue shortfall, as DisCos have limited scope to raise collections through higher tariffs while the cost of supplying electricity continues to exceed revenue recovered from consumers.

Minister of Power Joseph Tegbe said on Monday that the government had no immediate plan to increase electricity tariffs, as the administration focused on stabilising the electricity value chain, improving supply and strengthening market discipline.

However, industry experts and DisCo insiders said the decision would place greater pressure on collections, loss reduction and electricity supply to prevent the existing market revenue gap from widening.

FG tariff freeze puts DisCo revenue under pressure

Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said Nigeria’s electricity market was already facing a major financing gap, which had forced the government to intervene through subsidies and debt financing.

He said the existing structure was placing a significant financial burden on the government.

• “Already, there is a major financing gap in the sector. That is why government has been subsidising. And the subsidy has been — as of the last time — about N6 trillion outstanding. This was why the government had to raise bond to offset the debts to the GenCos and gas suppliers,” Yusuf said.
• “The current structure of running the sector is clearly not sustainable because it’s government that is subsidising. It’s looking more like the former subsidy regime that we had,” he added.

A source within the Abuja Electricity Distribution Company (AEDC) said the absence of an immediate tariff increase meant DisCos would have to rely more heavily on improving collection efficiency and reducing losses.

The source said the key issue was not simply the tariff level, but how much revenue DisCos could recover from electricity supplied to customers.

• “If the tariff remains where it is, the focus has to be on improving collection, reducing losses and ensuring that more of the energy supplied to customers is actually converted into revenue,” the AEDC source said.

The decision therefore places greater emphasis on how effectively DisCos convert electricity supplied into cash that can be remitted across the market.

DisCos face N1.36 trillion revenue gap

The scale of the challenge is reflected in the gap between the value of electricity supplied to DisCos and the amount they collect from customers.

In June 2026, DisCos received electricity valued at N315.73 billion but collected only N191.86 billion, leaving a N123.87 billion gap.

The problem extends beyond a single month. According to data from the Nigerian Electricity Regulatory Commission (NERC), the 11 DisCos supplied electricity valued at N3.68 trillion in 2025, billed N2.99 trillion and collected N2.32 trillion, resulting in a combined revenue gap of about N1.36 trillion.

• About N694.8 billion of the gap represented electricity supplied but not billed.
• Another N669.49 billion represented electricity that was billed but for which payment was not recovered.

Electricity-sector analyst Azeez Abegunde said DisCos could not rely on pricing to improve their revenue position if tariffs remained unchanged.

• “If tariff remains where it is, the only way for DisCos to improve their cash position is to sell more energy, bill more accurately and collect a higher percentage of what they bill,” he said.

The AEDC source similarly said additional electricity supply would only improve revenue if the energy was properly metered, billed and paid for.

• “If you increase the amount of energy available but you are not able to collect for it, then the market shortfall remains. The additional generation must translate into additional revenue for the entire value chain,” the source said.

The figures and industry comments point to collection efficiency and loss reduction as central factors in whether the market can improve its financial position without an immediate tariff increase.

Electricity market relies on better cash recovery

NERC data reveals that commercial and collection losses of between 30% and 40% among the challenges confronting DisCos, alongside inadequate metering, estimated billing, damaged assets and weak payment discipline.

The AEDC source said reducing losses could allow DisCos to generate more revenue without an immediate tariff increase.

• “The tariff issue is only one part of the problem. If you give a DisCo more energy but it cannot account for that energy, you have not solved the revenue problem,” the source said.
• “If losses come down from 30 or 40 per cent and collections improve, the same tariff can generate substantially more revenue. That is where the immediate opportunity is,” the insider added.

The source also said that increasing generation would not necessarily improve a DisCo’s cash position if additional energy was lost through technical losses, theft, bypasses or weak collection.

The government’s intervention could ease liquidity constraints for generation companies and gas suppliers and support electricity availability. However, Yusuf’s comments highlight that debt payments do not resolve the underlying revenue imbalance.

• If DisCos continue to collect substantially less than the value of electricity supplied to them, the market could continue to generate funding gaps even after existing debts are cleared.

Persistent under-recovery could affect DisCos’ ability to meet obligations to NBET, GenCos and other market participants, potentially contributing to delayed payments, accumulated debts and further government-backed interventions.

What you should know

In December, Nairametrics reported that the Federal Government issued the first bond under the Presidential Power Sector Debt Reduction Programme, marking a major step toward resolving payment arrears in Nigeria’s electricity industry.

• The government plans to issue up to N4 trillion in government-backed bonds to settle legacy debts owed to electricity generation companies and gas suppliers.
• The strategy has triggered concerns in some quarters over a potential debt-for-debt risk.

However, officials insist the approach will stabilise the power sector and support long-term economic growth.