The Nigerian Electricity Regulatory Commission (NERC) has disclosed that the Federal Government incurred a subsidy obligation of ₦418.79 billion in the fourth quarter of 2025 due to non-cost-reflective electricity tariffs.
This was revealed in the commission’s 2025 fourth-quarter report, which also highlighted persistent inefficiencies across Nigeria’s electricity value chain, leading to losses exceeding ₦300 billion during the period.
According to the report, electricity generation companies issued total invoices of ₦804.93 billion for power produced during the quarter.
However, due to the absence of cost-reflective tariffs across distribution companies, the Federal Government of Nigeria had to absorb 52.30 percent of the total cost through subsidies.
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of ₦418.79 billion,” the commission stated.
NERC explained that this represents a reduction of ₦39.96 billion, or 8.71 percent, compared to the subsidy recorded in the third quarter of 2025.
The report noted that the subsidy covered more than half of the generation costs, leaving electricity distribution companies responsible for paying ₦386.13 billion of the total invoices issued by generation companies.
“The government subsidy accounted for 52.30 percent of the total GenCo invoice, which is a 6.60 percentage-point decrease compared to 2025/Q3,” the commission added.
Beyond the subsidy burden, the regulator highlighted significant structural challenges affecting the sector, including declining remittances by distribution companies, high distribution losses, grid instability, and a slight drop in available generation capacity.
These challenges continue to weigh on Nigeria’s electricity market, raising concerns about the sustainability of the current tariff structure and the financial viability of the power sector.
Analysts say the persistence of subsidies and operational inefficiencies underscores the need for deeper reforms to improve cost recovery, enhance infrastructure investment, and stabilise electricity supply across the country.
