Power Subsidy Hits N418bn as Systemic Losses Bleed Sector

Nigeria’s electricity sector remains a fiscal black hole, with the Federal Government incurring N418.79bn in subsidy obligations during the final quarter of 2025. A new report from the Nigerian Electricity Regulatory Commission (NERC) reveals that the state continues to shoulder over 52 per cent of generation costs. This massive intervention serves only to paper over profound rot. Inefficiencies across the value chain led to separate commercial losses exceeding N300bn in the same period.

The financial gap stems from a refusal to implement cost-reflective tariffs across all distribution companies (DisCos). While generation companies issued invoices totalling N804.93bn, DisCos paid only N386.13bn. The government absorbed the remainder. Although the subsidy bill dropped by nearly 9 per cent compared to the previous quarter, NERC warns that the current open-ended regime exposes the treasury to “indeterminate” debt. The state is essentially paying to keep a failing system on life support.

Operational inefficiency is rampant. DisCos received N969.19bn worth of electricity but managed to bill customers for only N795.06bn. This discrepancy resulted in N174.12bn in billing losses. Furthermore, technical and collection failures wiped away another N139.19bn. In total, the sector lost nearly a third of its value to leaky wires and poor energy accounting. DisCos received 7,991.22GWh of power but could only account for 6,614.57GWh in their ledgers.

The grid itself remains temperamental. Average hourly generation improved slightly to 4,452.71MWh/h, but available capacity actually declined across 17 power plants. System frequency and voltage levels frequently fell outside safe operating limits, leading to a partial grid collapse on December 29. These technical failures highlight a paradox: the country is generating more energy while the infrastructure to deliver it becomes less reliable.

Remittance performance is also sliding. DisCos were expected to remit N471.66bn to upstream market participants but fell short by over N34bn. This decline in payment discipline suggests that the financial health of the sector is worsening despite high-level interventions. The only reason the subsidy bill did not climb higher was a strategic shift to feed more power to “Band A” customers, who pay premium rates.

The NERC report paints a picture of a sector trapped in a cycle of debt and decay. By allocating 45 per cent of available energy to premium feeders, the regulator is prioritising solvency over equity. However, as long as technical losses hover near 35 per cent, no amount of subsidy or selective billing will fix the foundations. Nigeria is paying billions for power that never reaches the meter.