Nigeria’s power sector subsidy burden has continued to mount, with the Federal Government’s debt to electricity generation companies (GenCos) rising to ₦1.05 trillion in the first half of 2025, according to the Nigerian Electricity Regulatory Commission (NERC).
The figure, contained in NERC’s Second Quarter 2025 Report, represents the outstanding power subsidy payment for the first and second quarters of the year ₦536.40bn in Q1 and ₦514.35bn in Q2.
The Commission said the growing obligation stems from the absence of cost-reflective tariffs, forcing the government to bridge the gap between the actual cost of power generation and the tariff charged to consumers.
“In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap in the form of tariff subsidies,” NERC stated.
Mounting Subsidy Burden
The report noted that the Federal Government incurred a ₦514.35bn subsidy obligation in Q2, a 4.11 per cent drop compared to ₦536.40bn recorded in Q1, largely driven by a 4.22 per cent reduction in energy offtake by distribution companies (DisCos).
Although the subsidy decreased slightly in naira terms (₦22.04bn), it still accounted for 59.6 per cent of the total GenCo invoice, up from 59.16 per cent in the first quarter.
During the period, GenCos invoiced ₦863.02bn for energy supplied, while the Nigerian Bulk Electricity Trading Plc (NBET) billed DisCos ₦348.66bn under the DisCo Remittance Obligation (DRO) framework — which replaced the Minimum Remittance Obligation model in January 2024.
NERC said the new framework was introduced to prevent unpaid subsidies from clogging DisCos’ balance sheets and hindering investment in network upgrades.
DisCos’ Performance and Monthly Breakdown
The report showed that DisCos remitted ₦333.90bn, achieving a 95.77 per cent remittance performance, slightly below the 95.79 per cent recorded in Q1.
All DisCos met their remittance obligations except Jos DisCo (60.85%) and Kaduna DisCo (41.84%). Kaduna, Abuja, and Enugu DisCos recorded improvements, while Jos DisCo’s performance dropped by 9.38 percentage points.
Monthly subsidy obligations during Q2 were ₦175.35bn (April), ₦176.87bn (May), and ₦162.12bn (June), NERC noted.
FG Approves ₦4tn Bond to Offset Legacy Debts
The development comes as the Federal Government recently approved a ₦4 trillion bond to clear long-standing debts owed to GenCos.
President Bola Tinubu had, in July 2025, met with chief executives of all generation companies, assuring them of the government’s commitment to resolving outstanding payments.
Minister of Power, Adebayo Adelabu, confirmed last week that the President approved the bond to defray the legacy debts.
However, GenCos have raised concerns that they have not yet been consulted on how the bond will be allocated or disbursed.
NERC, in its report, warned that the “open-ended subsidy regime” exposes the Federal Government to indeterminate financial risks, as energy volumes and generation costs fluctuate with supply mix particularly when thermal power sources dominate.
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