Electricity Subsidy May Cross N2trn as Tariff Freeze Persists

Nigeria’s electricity subsidy liability has climbed to N1.928 trillion, as regulated tariffs remain below the cost of supplying power to millions of consumers, the Nigerian Electricity Regulatory Commission (NERC) has said.

NERC disclosed the figure in its latest annual performance report, attributing the rise in part to inflation and movements in the foreign exchange market, Punch reports.

The subsidy represents the gap between the cost-reflective price of electricity and the tariffs paid by consumers, with the Federal Government covering the difference.

The Commission said the subsidy burden had risen sharply in recent years, from about N650 billion in 2023 to N1.94 trillion in 2024, before settling at roughly N1.92 trillion in 2025.

Quarterly subsidy obligations in 2025 stood at N536.4 billion in the first quarter, N514.35 billion in the second, N458.75 billion in the third and N418.79 billion in the fourth quarter, according to the data.

NERC attributed the widening gap to higher costs across the power value chain, including the naira’s depreciation, gas prices and other operating costs, noting that the cost-reflective benchmark had risen faster than regulated tariffs, leaving government to absorb a larger share of the shortfall.

Under Nigeria’s band-based tariff system introduced in 2024, customers are grouped according to expected hours of electricity supply. Band A customers, who are expected to receive at least 20 hours of supply daily, have moved closer to cost-reflective tariffs, while customers in lower bands continue to benefit from tariff protection.

NERC has also issued updated tariff orders for several distribution companies, including Ibadan, Eko, Enugu and Abuja Electricity Distribution Companies.

The Commission’s data further showed that Nigeria’s national electricity metering rate rose to 61.51 per cent, following the installation of more than 203,000 additional meters. However, distribution companies recorded average Aggregate Technical, Commercial and Collection losses of 37.03 per cent, reflecting losses linked to technical problems, electricity theft, commercial leakages and weak revenue collection.

The subsidy burden comes as government pursues broader fiscal consolidation alongside debt-service obligations, infrastructure needs and pressure to reduce its fiscal deficit, even as raising electricity tariffs remains politically and socially sensitive given widespread supply unreliability.