Electricity Subsidy Falls Quarterly, Still Costs Nigeria N1.92trn

The Federal Government spent N1.928 trillion on electricity tariff subsidies in 2025, even as the amount it carried for the power sector fell in each quarter of the year, data from the Nigerian Electricity Regulatory Commission shows.

The annual bill represented 57.44 per cent of the total Nigerian Bulk Electricity Trading invoice and averaged N160.69 billion every month. The figure was only slightly lower than the N1.949 trillion recorded in 2024.

NERC reported that the government’s subsidy obligation stood at N536.40 billion in the first quarter of 2025 before falling to N514.36 billion in the second quarter, N458.76 billion in the third and N418.79 billion in the fourth.

The reduction came in a year when the Federal Government directed that customer electricity tariffs be kept at the rates approved in July 2024. This meant the government continued to cover the difference between the cost of supplying electricity and the tariffs paid by customers.

NERC said the reduction in quarterly subsidy obligations was associated with lower energy off take by electricity distribution companies compared with earlier quarters. The commission also pointed to the higher share of electricity allocated to Band A customers.

The proportion of energy allocated to Band A and Band B customers reached 45 per cent in the fourth quarter, up from 40 per cent.

Tariff freeze keeps subsidy burden on government

The subsidy obligation arose because tariffs paid by electricity customers did not cover the cost reflective rates approved for the distribution companies.

NERC said the absence of cost reflective tariffs across all distribution companies left the government with an obligation of N1,928.31 billion for 2025.

The commission said the subsidy was largely tied to the policy of keeping allowed customer tariffs unchanged even as cost reflective tariffs rose.

The quarterly figures show that the government’s financial burden was highest in the first three months of the year, when the subsidy reached N536.40 billion. By the final quarter, the amount had dropped by more than N117 billion from the first quarter figure.

The second quarter recorded N514.36 billion, representing a fall of N22.04 billion from the first quarter. The third quarter brought the obligation down by a further N55.60 billion to N458.76 billion.

The decline continued in the fourth quarter, when the subsidy fell to N418.79 billion.

The annual figure, however, remained close to the amount recorded in 2024. The N1.928 trillion obligation in 2025 was about N20.69 billion below the N1.949 trillion recorded a year earlier.

The subsidy figures cover the difference created by customer tariffs and the cost reflective tariffs used in the electricity market. Under the tariff freeze, customers continued paying the approved rates, leaving the government to absorb the resulting gap.