The Federal Government says it can no longer keep paying the difference between what Nigerians are charged for electricity and what it actually costs to supply it. The Minister of Power, Joseph Tegbe, said at the weekend that the government plans to move the market towards bilateral agreements, under which power supplied is tied more directly to payment. He spoke at the Harvard Business School Association of Nigeria Energy Conference, where he also outlined plans to improve revenue collection, strengthen transmission and act against companies allegedly drawing power from the grid without authorisation.
“We can’t keep covering tariff shortfalls until we give power to every Nigerian,” Tegbe said. “So, what we need to do is move to bilateral agreements.” He said the government was reviewing the assumptions behind current tariffs and how the market could be restructured to make it financially sustainable.
The scale of the burden explains the shift. According to the Nigerian Electricity Regulatory Commission (NERC), the government’s electricity subsidy obligation rose from about ₦650 billion in 2023 to ₦1.94 trillion in 2024, and stood at ₦1.928 trillion in 2025. That is nearly a threefold increase in two years, driven largely by inflation, exchange rate movements and the decision to hold tariffs at July 2024 levels while the cost of supply kept rising.
Much of that obligation has not been paid. NERC data show that the government budgeted ₦958 billion for electricity subsidies in 2025 but released only ₦76.95 billion, about four per cent of the year’s obligation. That left an unpaid liability of roughly ₦1.85 trillion, which flows down the value chain to generation companies (GenCos) and the gas suppliers who fuel them.
The bill has eased this year, though not for reasons the sector would welcome. NERC put the subsidy at ₦679.58 billion in the first half of 2026, down 35.27 per cent from ₦1.05 trillion a year earlier. The regulator attributed much of the decline to lower energy offtake by distribution companies, which fell 8.56 per cent between the last quarter of 2025 and the first quarter of 2026. Even so, the subsidy in the second quarter still covered 49.6 per cent of GenCo invoices, meaning the government was effectively paying for about half of the power on the grid.
Collection remains a weak link. NERC figures show the 11 distribution companies received electricity worth ₦3.68 trillion in 2025 but collected ₦2.32 trillion from customers, a gap of about ₦1.36 trillion. It is this leakage that the bilateral model is designed to address, by linking each party’s supply to what it actually pays for.
Tegbe also turned his attention to unauthorised users. He said some companies connected directly to the grid were taking as much as 150 megawatts daily, and that the government would bring them under formal arrangements. “We’re going after those companies,” he said. He did not name the firms or say whether the figure referred to one company or several combined. If the 150MW is a combined figure, it is still equal to about 3.5 per cent of the roughly 4,300MW the Nigerian Independent System Operator put as average available generation earlier this year.
Gas supply sits at the heart of the problem. Thermal plants account for about 70 per cent of grid generation, and NERC’s own factsheet puts installed capacity at 13,625MW against an average plant availability of 30 per cent in March 2026. The Association of Power Generation Companies has put total sector debt at ₦6.8 trillion as of February 2026, and has estimated that about ₦3.3 trillion of what is owed to thermal plants belongs to gas suppliers.
The government’s figures differ. Tegbe said on September 21 that the government had raised ₦1.23 trillion against a verified debt backlog of ₦3.3 trillion, including a first bond of ₦501 billion issued in January under the Presidential Power Sector Debt Reduction Programme. The gap between the two positions reflects a long-running dispute between GenCos and the Nigerian Bulk Electricity Trading Plc over which claims have been reconciled.
The Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Rabiu Abdullahi Umar, told the same conference that the country needed to stop debating gas reforms and start implementing existing plans. He said the Gas Aggregation Company of Nigeria had a central role in enforcing domestic supply obligations, which some producers were still failing to meet. Regulators, he added, were working on arrangements to redirect gas to where it is needed when an obligated supplier cannot deliver but another operator has volumes available.
The minister has not given a timeline for the transition, and how the bilateral model would affect household tariffs remains unclear. Tegbe said only last month that there was no immediate plan to raise electricity tariffs. With subsidy obligations still close to ₦700 billion every six months and debts across the value chain unresolved, the next NERC quarterly report will show whether the planned shift is changing the numbers.