Nigeria electricity subsidy debt hits N536.4bn in Q1 2025 amid rising GenCo arrears and Federal Government struggles to clear over N4tn in power obligations

[dropcap]N[/dropcap]igeria electricity subsidy debt has surged to alarming levels, as the Federal Government incurred N536.4bn in electricity subsidy obligations in just the first quarter of 2025.

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The development adds further pressure to the already strained power sector, where over N4tn in outstanding debts remains unpaid to generation companies.

According to the latest report from the Nigerian Electricity Regulatory Commission, this subsidy figure represents a 13.7 per cent rise from the N471.69bn recorded in the last quarter of 2024.

The regulator revealed that the government now shoulders 59.16 per cent of the total GenCo invoice, a sharp increase driven by the continued freeze on allowed electricity tariffs.

The government’s policy to maintain non-cost-reflective tariffs, despite rising generation costs, means the difference must be covered through subsidies.

In reality, this cost burden is transferred to the Nigerian Bulk Electricity Trading Plc, which passes it on to GenCos after receiving partial payments from the distribution companies.

“The increase in the subsidy obligation of the FGN is a result of the FGN’s policy to freeze allowed tariffs paid by customers despite the increase in the cost-reflective tariffs across the quarters,” the report stated.

While the government has implemented the DisCo Remittance Obligation regime, intended to clarify payments and subsidies, actual remittances from DisCos remain below full market value.

In Q1 2025, the DRO-adjusted invoice stood at N370.36bn, with DisCos remitting N354.77bn, reflecting a 95.79 per cent performance.

DisCos such as Benin, Eko, Ibadan, Ikeja, Kano, Port Harcourt and Yola achieved full remittance performance.

Abuja and Enugu came close at 98.43 per cent and 99.27 per cent respectively. Kaduna, however, recorded a mere 37.77 per cent, the lowest in the country.

DisCos also remitted N59.49bn to the Market Operator from a total invoice of N61.76bn, amounting to 96.32 per cent remittance performance.

This was a notable improvement from the previous quarter’s 88.32 per cent. Kano and Kaduna DisCos recorded the largest quarter-on-quarter improvement in payments.

Despite these improvements, GenCos continue to suffer the effects of underfunding. Stakeholders say the inability of the Federal Government to settle the full value of power supplied has left generation companies struggling to maintain infrastructure, purchase gas, or undertake capacity expansion.

“The sector is practically being kept on life support. We cannot keep producing power without adequate funding,” a GenCo executive, who spoke on condition of anonymity, said last week. “We have not even been officially contacted despite repeated government promises.”

Minister of Power Adebayo Adelabu confirmed ongoing efforts to facilitate a meeting between the generation companies and President Bola Tinubu.

This comes after an earlier commitment by the Presidency to resolve at least N2tn of the debt before the end of the second quarter.

So far, no official meeting has taken place. The silence has alarmed stakeholders, who fear that continued delays could further damage the fragile electricity value chain.

Introduced in January 2024, the DRO framework replaced the previous Minimum Remittance Obligation regime.

It was designed to prevent mounting subsidy debts from clogging the books of DisCos and halting investment in power infrastructure. Yet the core issue—unpaid government obligations—persists.

NERC’s report underscores the need for urgent reforms. Without cost-reflective tariffs or a concrete debt resolution plan, the generation segment faces serious liquidity risks.

The commission warned that unless the Federal Government pays its share promptly, the power supply may deteriorate.