The Federal Government’s electricity subsidy bill dropped by more than a third in the first six months of 2026, according to figures released by the Nigerian Electricity Regulatory Commission, offering the clearest sign yet that lower power consumption, rather than higher tariffs, is easing one of the country’s heaviest recurrent costs.
In its second quarter report, NERC put the subsidy obligation at N679.58 billion for the half year, a 35.27 per cent fall from the N1.05 trillion recorded over the same period in 2025. The commission said the obligation stood at N321.26 billion in the second quarter, down N37.06 billion or 10.34 per cent from N358.32 billion in the first quarter.
The subsidy is the gap between what it costs to generate and distribute electricity and the lower tariff that customers are allowed to pay, with the government covering the difference. NERC attributed the quarterly decline mainly to a 3.40 per cent drop in the volume of electricity taken up by distribution companies between the two quarters.
That explanation carries an uncomfortable edge. A subsidy that shrinks because less power is being supplied, rather than because more revenue is being collected, points to weaker electricity delivery rather than a healthier sector. The commission’s own data show the second quarter subsidy still covered 49.60 per cent of the total invoices issued by generation companies, down from 51.95 per cent in the first quarter, meaning the government is still absorbing close to half the cost of power sold through the market.
The figures sit within a larger pattern that NERC has tracked for years. In its 2025 industry report, the commission put the full year subsidy at N1.928 trillion, about N160.69 billion a month, a slight decline from the N1.949 trillion recorded in 2024. The 2023 figure was roughly N650 billion, which places the scale of the increase over two years in sharp relief and shows how far the burden has grown since the current tariff structure took shape.
Much of that growth traces to a single policy decision. After moving Band A customers, those promised at least 20 hours of supply daily, onto a cost reflective tariff of about N209.50 per kilowatt hour in April 2024, the government froze all approved customer rates at their July 2024 levels. NERC has said repeatedly that the subsidy persists because tariffs for the remaining bands stayed below the cost of supply even as that cost rose with naira depreciation, gas prices and other operating expenses.
The World Bank has put the annual tariff shortfall at about N1.9 trillion in both 2024 and 2025, a figure broadly consistent with the commission’s own numbers. The convergence of the two estimates lends weight to the view that the gap is structural rather than a one off, and that it will not close on its own while the freeze holds.
The second quarter report also detailed how distribution companies met their obligations to the rest of the market. The companies remitted N306.62 billion out of an adjusted invoice of N326.46 billion issued by the Nigerian Bulk Electricity Trading company, a remittance rate of 93.92 per cent. That was marginally below the 94.29 per cent recorded in the first quarter.
Performance varied widely across the eleven companies. Benin, Eko, Enugu, Ibadan, Ikeja, Port Harcourt and Yola each remitted in full, while Kano, Jos and Kaduna fell below 70 per cent, at 66.51 per cent, 62.39 per cent and 50.10 per cent respectively. Kaduna’s figure means it passed on barely half of what it was invoiced, a shortfall that ultimately widens the hole the government and the wider market must fill.
A separate strain runs underneath these numbers. NERC reported that the distribution companies received electricity worth N946.57 billion during the quarter but billed customers only N744.67 billion, leaving N201.90 billion in power that was supplied but never billed. Combined billing efficiency fell to 78.67 per cent, a reminder that collection and metering weaknesses remain a drag on the sector even where remittance looks healthy.
For the public finances, the direction of travel matters. A lower subsidy bill frees fiscal room at a time when the government is managing competing pressures across fuel, foreign exchange and debt. Yet the saving recorded in the first half rests substantially on reduced consumption, which is not a durable foundation, and the authorities have so far ruled out a fresh tariff increase that would narrow the gap more permanently.
What remains unresolved is how the second half will unfold. Whether the subsidy continues to fall will depend on electricity off take through the rest of the year, any movement on tariffs, and the cost pressures from gas and the exchange rate that have driven the shortfall wider since 2023. NERC publishes its data quarterly, so the third quarter report will be the next firm measure of whether the trend holds.