Electricity subsidy may hit N2tn amid tariff freeze
Electricity subsidy may hit N2tn amid tariff freeze
The Federal Government may spend about N2 trillion to subsidise electricity this year as it maintains its position against an immediate increase in electricity tariffs.
The Minister of Power, Joseph Tegbe, disclosed the government’s position on electricity tariffs at a media parley in Abuja on Monday while marking his first 100 days in office.
“There are no immediate plans to increase electricity tariffs. Our goal is to build a commercially viable power sector while protecting vulnerable consumers,” Tegbe said.
The minister’s position comes against the backdrop of the N1.93tn electricity subsidy incurred by the Federal Government in 2025, according to the Nigerian Electricity Regulatory Commission’s 2025 Annual Report.
NERC said the subsidy obligation represented 57.44 per cent of the total Nigerian Bulk Electricity Trading invoice during the year and averaged N160.69bn monthly.
The commission said the government incurred the subsidy because allowed electricity tariffs remained below cost-reflective levels, with the Federal Government covering the resulting gap.
“In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff 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 N1.93tn (57.44 per cent of total NBET invoice) during the year,” the commission said.
With the government maintaining that there are no immediate plans to increase tariffs, the subsidy burden could remain around the N2tn level this year. The subsidy burden neared N2tn in 2024 and 2025 despite the Band A to E tariff categorisation introduced in 2024.
Aside from Band A customers who pay the real cost of electricity, customers on other bands still enjoy government subsidies, which are now close to N2tn.
Earlier, electricity generation companies questioned the effectiveness of the Federal Government’s N4tn Presidential Power Sector Debt Reduction Programme, warning that fresh liabilities estimated at over N7tn could accumulate before the programme is fully implemented.
The power producers, under the aegis of the Association of Power Generation Companies, said that while they were not opposed to the Federal Government’s plan to raise bonds to settle outstanding obligations, the initiative would not provide a lasting solution to the liquidity crisis in the Nigerian Electricity Supply Industry because debts continue to accumulate monthly.
“Every month, the DisCos are not paying 100 per cent. NBET is not paying 100 per cent. The N4tn legacy debt is until December 2024. So, how about the accumulation for 2025? And what is already accumulated for 2026? So by the time you finish issuing this N4tn bond over seven years, by 2033, two times what you’re going to pay would have accumulated. So what is your plan?” the APGC Chief Executive, Joy Ogaji, asked the question.
Ogaji also called on the Federal Government to adopt a more sustainable approach to electricity subsidies, arguing that the current subsidy arrangement exists largely on paper because there is no corresponding budgetary provision.
“One of the sustainable ways is for the Federal Government to acknowledge the fact that they cannot subsidise the power market. Because you can see it’s only on paper that the government is subsidising power. It’s not in the budget.
“There is no monetary provision anywhere for subsidies, not even in the supplementary budget; it’s nowhere. It’s just being. You said you would pay. We have not seen it,” she stressed.
The CEO proposed that the government should clearly define the level of subsidy it could afford and make budgetary provisions for it instead of maintaining a blanket subsidy policy that has contributed to mounting debts across the electricity value chain.
Speaking on Monday, the minister said the administration was working to address the sector’s long-standing debt, revenue leakages, metering gaps and infrastructure constraints.
He said his first 100 days, covering June 8 to September 16, had largely focused on diagnosing the problems across the electricity value chain, stabilising existing infrastructure and restoring market discipline.
According to him, gas supply to power plants was constrained by damaged pipelines and commercial conditions that discouraged investment, while ageing equipment, deferred maintenance and stalled projects prevented available capacity from reaching consumers.
He said the sector was also weakened by poor payment discipline, with generation companies receiving only 27 per cent of their bills.
“When President Bola Tinubu entrusted me with the responsibility of serving as Minister of Power, I made four promises to Nigerians. I promised a disciplined approach to solving the sector’s problems. I promised to pursue grid stability through structured, strategic reforms. I promised visible incremental improvements.
“Upon assuming office, the diagnosis we undertook at the onset revealed constraints at every segment of the electricity value chain. Gas supply to power stations was limited by damaged pipelines and commercial terms that discouraged investment.
“Our generation fleet was heavily dependent on thermal plants, with ageing equipment, deferred maintenance, stalled projects, and capacity unable to reach consumers. The sector diagnosis revealed payment of only 27 per cent of generation companies’ bills, undermining their ability to maintain plants and pay gas suppliers,” Tegbe stated.
The minister said transmission infrastructure was similarly under pressure from vandalised towers and lines, overstretched equipment and frequent system tripping.
NERC explained in its 2025 report that, under the subsidy regime, the government covers the gap between the cost-reflective and allowed tariffs through tariff subsidies.
The regulator said the subsidy is applied to the generation cost payable by DisCos to NBET, while the portion of generation costs not covered by the DisCos is invoiced to the Federal Ministry of Finance for settlement.
It said the framework was introduced partly to prevent unpaid subsidy debts from accumulating on the balance sheets of DisCos and limiting their ability to raise finance for critical investments in their networks.
The N1.93tn subsidy obligation recorded in 2025 highlights the financial cost of keeping electricity tariffs below the cost of supplying power.
For 2026, the government’s decision not to immediately raise tariffs means it will continue to bear a significant portion of the cost of electricity while efforts are made to improve collections, infrastructure, gas supply and service delivery.
