Nigeria’s electricity subsidy bill soared to ₦1.94 trillion in 2024, marking a 220% jump from ₦610 billion in 2023, according to the Nigerian Electricity Regulatory Commission (NERC).
Despite this sharp rise, the Federal Government has paid only ₦371.34 million — less than 1% of the total.
The increase was driven by factors including the naira float, removal of fuel subsidies, and persistent inflation and forex instability.
NERC’s 2024 Annual Report revealed that the government had to cover the shortfall between actual cost-reflective tariffs — averaging ₦175.31/kWh — and the subsidized average tariff of ₦100.27/kWh, resulting in a gap of ₦75.04 per kilowatt-hour.
In Q1 2024 alone, subsidy spending hit ₦633.30 billion — a 303% increase from the 2023 quarterly average of ₦157.15 billion and a 1,699% surge compared to 2022 levels.
A tariff hike for Band A customers in April 2024 briefly reduced subsidies to ₦380.06 billion in Q2.
However, a subsequent tariff freeze led to renewed increases, with subsidy figures rising again to ₦464.12 billion in Q3 and ₦471.69 billion in Q4.
DisCos received varying amounts in subsidies, with Abuja receiving the highest at ₦285 billion, followed by Ikeja (₦272bn), Ibadan (₦236bn), and Eko (₦231bn). Yola DisCo, with the highest cost-reflective tariff at ₦266.64/kWh due to security and infrastructure issues, remains the most heavily subsidized per unit of power.
To address liquidity concerns, the Federal Government introduced the DisCo Remittance Obligation (DRO) framework in January 2024, replacing the Minimum Remittance Obligation (MRO). Under this new model, DisCos are expected to pay what their approved tariffs can cover, while the government is responsible for the shortfall.
The unpaid subsidy, however, has worsened liquidity across the electricity value chain, with power generation companies (GenCos) now owed nearly ₦5 trillion.
Minister of Power, Adebayo Adelabu, has admitted the funding gap and warned that cost-reflective tariffs may become necessary to prevent further breakdowns in electricity supply.
The ballooning debt raises serious concerns about the sustainability of Nigeria’s power sector and the long-term viability of its subsidy-heavy pricing system.
