Nigeria’s electricity subsidy bill surged to ₦536.4 billion in the first quarter of 2025, worsening an already fragile cash-flow squeeze in the power sector and pushing the Federal Government’s outstanding obligations to generation companies (GenCos) above ₦4 trillion.
According to The PUNCH, the Nigerian Electricity Regulatory Commission said the government’s subsidy rose by ₦64.7 billion compared with the last quarter of 2024.
The outlay represents 59 percent of the total invoices issued to the Nigerian Bulk Electricity Trading Company for energy supplied during the period.
“In the absence of cost-reflective tariffs, the Federal Government covers the gap between actual generation cost and the tariffs approved for customers,” the commission noted.
“For ease of administration, the subsidy is applied at source to the generation cost payable by distribution companies (DisCos) to NBET.”
To manage the process, the regulator introduced a DisCo Remittance Obligation framework in January 2024. Under the new regime, each DisCo is billed only what its tariff can sustain, while the unfunded portion is billed directly to the Ministry of Finance for settlement.
“The DRO replaced the former Minimum Remittance Obligation to prevent unpaid subsidies from clogging DisCos’ balance sheets and stalling investment in networks,” NERC explained.
“DisCos are now expected to remit 100 percent of their DRO, and the balance is invoiced to the government as tariff subsidy.”
Despite the safeguard, GenCos continue to complain of cash shortfalls and delayed payments, hindering routine maintenance and gas purchases.
In a recent interview, Power Minister Adebayo Adelabu conceded the government is “struggling to meet its obligations” but said talks are under way to resolve the impasse.
“We recognise the burden GenCos are carrying,” his spokesperson, Bolaji Tunji, told PUNCH. “Efforts are ongoing to arrange a meeting with President Bola Tinubu and the generators to agree on a realistic payment plan.”
NERC data show that DisCos remitted 95.8 percent of the ₦370.36 billion DRO-adjusted invoice they received from NBET in Q1 2025, up from 93.3 percent in the preceding quarter. Benin, Eko, Ibadan, Ikeja, Kano, Port Harcourt and Yola companies hit full compliance, while Kaduna DisCo paid just 37.8 percent, the weakest performance in the market.
Similarly, payments to the Market Operator for transmission and administrative services improved to 96.3 percent, with only Jos and Kaduna missing the 100 percent mark.
The subsidy spike is largely blamed on the government’s order freezing end-user tariffs despite climbing generation costs.
“The increase reflects the policy decision to hold customer tariffs steady even as cost-reflective rates have continued to rise,” NERC said.
Presidential energy adviser Olu Verheijen recently disclosed plans to settle ₦2 trillion of the ₦4.7 trillion owed to GenCos by the end of the current quarter.
Yet industry executives say no formal invitation has reached them.
“Two months after the announcement, we have had no engagement with the authorities,” a senior GenCo official told PUNCH on condition of anonymity.
“Until concrete payments are made, plants will keep operating under severe financial stress.”
With mounting debts and a subsidy bill exceeding half a trillion naira in just three months, analysts warn the system cannot withstand prolonged government under-funding.
NERC has repeatedly said only cost-reflective tariffs—or full, timely subsidies—can stabilise the sector and support the investments needed to end Nigeria’s chronic power shortages.
