Electrical energy subsidy nears N2tn yearly

Amid its struggles to pay the over N4tn debt owed to energy technology corporations, the Federal Authorities incurred a complete of N1.98tn in electrical energy subsidy obligations in 12 months, from October 2024 to September 2025.

This was in response to the quarterly studies launched by the Nigerian Electrical energy Regulatory Fee. Within the fourth quarter of 2024, protecting October to December, the electrical energy subsidy incurred by the federal government was N471.69bn. It was N536.4bn within the first quarter of 2025 and N514.35bn within the second quarter of final 12 months.

The newest report from NERC launched on Tuesday confirmed that the Federal Authorities incurred an influence subsidy burden of N458.75bn within the third quarter of 2025 as electrical energy tariffs remained beneath cost-reflective ranges, making a complete of N1.98tn within the 12-month interval, from October 2024 to September 2025.

NERC acknowledged in its studies that within the absence of cost-reflective tariffs, the federal government undertook to cowl the resultant hole between the cost-reflective and allowed tariff within the type of tariff subsidies.

The PidomNigeria noticed that the subsidy burden stays excessive regardless of the Band A tariff changes of April 2024. Recall that the Minister of Power, Adebayo Adelabu, has repeatedly identified that the electrical energy subsidy was not sustainable, proposing a subsidy association that will cowl solely the poor.

Consultants who spoke with The PidomNigeria additionally maintained that the federal government ought to discover a means out of the burden of electrical energy subsidy.

NERC acknowledged that the subsidy is utilized at supply via the DisCos’ cost obligations to the Nigerian Bulk Electrical energy Buying and selling Plc. It acknowledged that for ease of administration, the subsidy is simply utilized to the technology price payable by DisCos to NBET at supply within the type of a DisCo’s Remittance Obligation.

In accordance with the regulator, the DRO represents the whole GenCo bill that’s billed to the DisCos by NBET primarily based on what the allowed DisCo tariffs can cowl. NERC added that DisCos are nonetheless required to completely meet different market invoices.

“DisCos are anticipated to remit 100 per cent of the invoices obtained from the MO for transmission and administrative service prices.” It disclosed that the subsidy obligation in Q3 amounted to N458.75bn, although it represented a decline from the earlier quarter.

“Because of the absence of cost-reflective tariffs throughout all DisCos, the federal government incurred a subsidy obligation of N458.75bn; this represents a N55.59bn discount in FGN subsidy in comparison with 2025/Q2 (N514.35bn),” it stated.

The fee stated the subsidy accounted for over half of whole technology invoices, stating, “The subsidy obligation of the federal government decreased in naira phrases and accounted for 58.63 per cent of the whole GenCo bill, which is a 0.97 pp lower in comparison with 2025/Q2 when the subsidy accounted for 59.60 per cent of the whole GenCo bill.”

In accordance with NERC, the discount was pushed by decrease vitality offtake and a marginal decline in technology price. “It’s because whereas the allowed end-user tariffs remained unchanged throughout the quarters, there was a 6.08 per cent lower in vitality offtake by the DisCos throughout the quarter, in addition to a discount in precise technology price (N/kWh) by 0.98 per cent,” the report added.

The fee famous that the DRO framework changed the Minimal Remittance Obligation regime in January 2024, and DisCos are anticipated to pay 100 per cent of their DROs.

Explaining the explanation for the coverage shift, NERC stated, “The transition to the DRO regime was necessitated by the danger of unpaid tariff subsidy money owed encumbering the stability sheets of the DisCos, thereby stopping them from elevating finance to undertake crucial investments of their distribution community.”

Beneath the framework, the regulator stated the Federal Authorities straight settles the subsidy part of technology prices. Beneath the DRO framework, NBET straight invoices the portion of GenCo prices not coated by DRO (tariff subsidy) to the Federal Ministry of Finance for rapid settlement.

On funds to NBET, the regulator stated DisCos recorded a remittance fee of 95.23 per cent in Q3. The DRO-adjusted bill from NBET to the DisCos was N323.70bn, whereas the whole remittance made was N308.25bn, in response to NERC.

It added, “Comparatively, in 2025/Q2, the DRO-adjusted bill from NBET to DisCos was N348.66bn, and the whole remittance was N333.90bn, which translated to 95.77 per cent remittance efficiency.”

NERC defined that almost all DisCos met their obligations in full, as disaggregated remittance efficiency of the DisCos to NBET in 2025/Q3 reveals that every one DisCos, besides Kano (98.74 per cent), Benin (94.77 per cent), Jos (65.13 per cent), and Kaduna (40.16 per cent), achieved 100 per cent remittance efficiency.

The fee famous combined efficiency among the many defaulting DisCos on a quarter-on-quarter foundation, including, “1 / 4-on-quarter evaluation confirmed that Jos (+4.29 pp) DisCo recorded an enchancment in remittance efficiency to NBET in 2025/Q3 in comparison with 2025/Q2, whereas Benin (-5.23 pp), Kaduna (-1.68 pp) and Kano (-1.26 pp) DisCos recorded decreases in remittance efficiency.”

The report confirmed that every one different DisCos (Abuja, Eko, Enugu, Ibadan, Ikeja, Port Harcourt, and Yola) maintained 100 per cent remittance to NBET throughout the quarters.

On remittances to the Market Operator, the regulator stated DisCos paid N73.03bn out of N76.77bn invoiced in Q3. This cost interprets to 95.13 per cent remittance efficiency. “This represents a marginal enhance when in comparison with the 95.07 per cent remittance efficiency recorded in 2025/Q2 when DisCos remitted N65.30bn out of the N68.68bn bill issued by the MO.”

In accordance with the fee, the disaggregated remittance efficiency of the DisCos to the MO reveals that every one the DisCos, besides Jos and Kaduna, recorded 100 per cent remittance efficiency to the MO within the third quarter.

It additional acknowledged, “Since January 2025, solely Jos and Kaduna DisCos have didn’t remit 100 per cent of the MO bill,” including that “between 2025/Q2 and 2025/Q3, Jos recorded a rise of 6.72 pp, whereas Kaduna recorded a decline of 4.29 pp of their remittance efficiency to MO.”

Operators within the energy sector have repeatedly known as on the Federal Authorities to take away the subsidies on electrical energy in order to finish the challenges of liquidity. Since April 2024, clients on Band A have stopped having fun with electrical energy subsidies.

The report additional confirmed that whole technology prices for Q3 would have stood at N782.45bn with out authorities intervention. Nonetheless, because of the subsidy, the Nigerian Bulk Electrical energy Buying and selling Plc bill payable by DisCos fell to N323.70bn.

Regardless of modest enhancements in billing and assortment effectivity, electrical energy distribution corporations recorded mixed billing losses of N315.17bn between the second and third quarters of 2025, largely resulting from vitality theft, poor metering, and weak industrial controls.

NERC disclosed that DisCos have been unable to account for N167.25bn value of vitality obtained at their buying and selling factors in Q2, whereas billing losses in Q3 stood at N147.92bn. The fee didn’t state the billing loss determine for the primary quarter.

In Q3, the naira worth of whole vitality offtake by all DisCos stood at N854.53bn, whereas vitality billed amounted to N706.61bn, translating to a billing effectivity of 82.69 per cent. Though this represented an enchancment of 1.08 proportion factors over the 81.61 per cent recorded in Q2, DisCos nonetheless suffered important income leakages.

NERC stated the losses have been pushed largely by industrial losses, together with vitality theft and poor vitality accounting, in addition to the shortcoming of DisCos to invoice vitality on the weighted common allowed tariff.

On income assortment, DisCos generated N570.25bn out of the N706.61bn billed in Q3, leading to a group effectivity of 80.70 per cent, up from 76.07 per cent within the earlier quarter.

Nonetheless, the regulator stated the weighted common mixture technical, industrial, and assortment loss throughout all DisCos remained excessive at 33.27 per cent, exceeding the 2025 MYTO goal of 20.54 per cent by 12.73 proportion factors.

This translated to a cumulative income lack of N108.75bn, regardless of a 4.65 proportion level enchancment from the 37.92 per cent recorded in Q2. Solely Eko and Ikeja Electrical energy Distribution Corporations met their ATC&C loss targets throughout the quarter, whereas Kaduna DisCo posted the worst efficiency, recording an precise ATC&C lack of 71.10 per cent towards a goal of 21.32 per cent.

On market remittances, DisCos have been billed a cumulative upstream bill of N400.48bn in Q3, comprising N323.70bn payable to NBET and N76.77bn for transmission and administrative providers owed to the Market Operator.

Out of this quantity, DisCos remitted N381.29bn, leaving an excellent stability of N19.18bn and a remittance efficiency of 95.21 per cent, barely beneath the 95.65 per cent recorded in Q2.

Nonetheless, the report highlighted weak remittances from worldwide bilateral clients, who paid solely $7.13m out of the $18.69m invoiced, representing a 38.09 per cent remittance fee. Against this, home bilateral clients paid N3.19bn out of N3.64bn invoiced, attaining a stronger 87.61 per cent remittance fee.

Professional speaks

The convener of PowerUp Nigeria, Adetayo Adegbemle, stated the electrical energy subsidy is not sustainable, saying the federal government should have discovered a means out of the burden. Adegbemle stated the subsidy impacts the whole worth chain because the Federal Authorities failed to meet the subsidy obligations.

“I’ve been pushing that our present subsidy shouldn’t be sustainable. And that’s as a result of it impacts the worth chain all the best way down. If you’re asking me right this moment once more what I really feel about energy subsidy, I’ve not modified my place on that. Subsidy shouldn’t be sustainable. The federal government is meant to have developed a means out of it,” he stated.

Adegbemle believed that one of many the explanation why the federal government had but to take away subsidies was due to political concerns, particularly the consequences of the gasoline subsidy elimination.

“I consider that there are some political concerns as effectively. Certainly one of them was the shock impact of the elimination of the gasoline subsidy. And the rising trade charges. If something, everyone knows that the shock impact led to excessive inflation.

“So, on one hand, I wish to consider that that’s one of many the explanation why they’ve not eliminated energy subsidies. However then, we have now additionally proposed options for them, one among which is the Energy Client Help Fund that the Electrical energy Act itself requested them to work on. The Federal Authorities has not paid these subsidies; if it had paid, we wouldn’t be owing the GenCos. We have to deliver producers again to the grid,” he stated.

Customers kick

In the meantime, the Nigeria Electrical energy Customers Advocacy Community has described the Federal Authorities’s service-based tariff coverage as a failure, warning that latest electrical energy tariff changes have failed to cut back subsidy funds and as an alternative deepened inefficiencies within the energy sector.

Talking with The PidomNigeria on Tuesday, the Nationwide Secretary of NECAN, Uket Obonga, stated the introduction of the Band A tariff regime, which was justified by authorities officers as a pathway to subsidy discount, had delivered the other consequence.

“I’ve all the time known as the service-based tariff coverage a rip-off from the start, and going by the promise made by the regulator, minister, and the federal government in introducing the Band A tariff to cut back subsidy, has it been lowered now? The extra baffling factor is how income collected by the Discos is sort of now at par with the quantity incurred as electrical energy subsidy,” Obonga stated.

He additionally expressed concern that income collected by electrical energy distribution corporations was now nearly at par with the quantity the Federal Authorities was paying as an electrical energy subsidy, elevating questions in regards to the effectiveness of the coverage.

“Essentially the most baffling factor is how income collected by DisCos is sort of now on the similar degree as what the federal government is incurring as an electrical energy subsidy,” he stated. “That alone reveals that the coverage and its implementation have failed.”

The buyer advocate accused DisCos of benefiting from poor provide whereas persevering with to gather tariffs from clients. “DisCos at the moment are benefiting from promoting darkness to Nigerians and nonetheless gathering cash,” Obonga stated. “They’re charging for energy that’s not provided. That’s the actuality.”

He stated the unique goal of the service-based tariff regime had collapsed as a result of the construction of electrical energy demand in Nigeria was essentially flawed.

“The entire thought behind the service-based tariff was that industrial clients would off-take energy, pay industrial charges, and assist maintain the trade,” he stated. “However right this moment, we don’t have sufficient industrial clients on the grid. Residential clients can’t pay what’s required to maintain the facility sector.”

Obonga additionally faulted the Federal Authorities’s declare that industrial customers have been being inspired again to the nationwide grid, insisting there was no proof to help such assertions.

“The federal government shouldn’t be utilizing information to do its projections,” he stated. “Recall that the Minister of Power stated the federal government was working to deliver industrial clients again to the grid. What number of corporations have truly returned? The place is the information?”

In accordance with him, poor provide high quality, unreliable energy, and excessive tariffs had made it tough to persuade producers to desert self-generation. “It’s even tough to persuade them to return to the grid,” he stated. “As soon as an organization has invested closely in various energy, it is not going to come again simply.”

The NECAN secretary additionally raised issues over the Federal Authorities’s N4tn electrical energy bond, which was issued to handle legacy money owed and stabilise the facility sector.

“Now the federal government has give you a N4tn bond, and it has already been issued,” Obonga stated. “What’s the results of that bond? It was concluded final 12 months, however there’s nonetheless no readability on what it has achieved.”

He expressed doubts over investor urge for food for the bond, warning that it might not have attracted the extent of funding anticipated by the federal government. “I cannot be shocked if the bond doesn’t attract the required funding from traders,” he stated.