The Federal Government’s electricity tariff subsidy obligation reached ₦1.928tn in 2025, as outstanding debts owed to power generation companies reportedly approached ₦6tn, highlighting the financial pressures facing Nigeria’s electricity sector.

The Nigerian Electricity Regulatory Commission (NERC), in its 2025 industry report, said the government’s gross tariff subsidy obligation amounted to ₦1.928tn, representing 57.44 per cent of the total invoice issued by the Nigerian Bulk Electricity Trading Plc (NBET).

Also read: Otedola hosts Hamzat, recalls sharing bunk bed 49 years ago

The figure translates to an average monthly subsidy obligation of approximately ₦160.69bn.

NERC’s report showed that the subsidy obligation stood at ₦536.40bn in the first quarter of 2025, ₦514.36bn in the second quarter, ₦458.76bn in the third quarter and ₦418.79bn in the fourth quarter.

The 2025 total was slightly lower than the ₦1.949tn recorded in 2024.

The subsidy burden comes amid concerns over the ability of generation companies, commonly known as GenCos, to sustain operations and invest in the sector while awaiting payments.

In September 2026, the Federal Government signed a ₦728.979bn Series 2 bond under its ₦4tn Power Sector Debt Reduction Programme to settle verified legacy debts owed to electricity generation companies and improve liquidity across the industry.

The transaction comprised ₦402bn in cash bonds raised through the domestic capital market and ₦326.979bn in non-cash bonds allocated to participating generation companies.

NBET Managing Director and Chief Executive Officer Akin Odeyemi said the organisation had commenced settlement of participating GenCos and their associated gas companies following the successful issuance and signing of the bonds.

He described the transaction as a significant step towards implementing the Presidential Power Sector Debt Reduction Programme under President Bola Tinubu’s administration.

According to Odeyemi, the settlements were being carried out through cash and non-cash bonds in line with the approved framework.

The programme is intended to address verified outstanding obligations and ease financial pressures on companies supplying electricity to the national grid.

Despite persistent concerns about electricity supply, the Minister of Power, Joseph Tegbe, has said generation and transmission performance improved over the preceding three months.

Tegbe acknowledged that some parts of the country continued to experience poor supply but said the government was working to address the challenges.

He said operational reports showed generation and transmission levels above 5,000 megawatts in recent weeks, compared with a range of 3,700MW to 4,700MW before June. He also cited a generation peak of 5,330MW during August and September.

“Our next task is to sustain these gains and translate them into more dependable supply at customer level. We are aware that a national peak alone cannot describe the experience of every community,” he said.

The minister identified three priorities for the sector: stabilising the electricity value chain, restoring market discipline and strengthening governance.

He said the 375MW Alaoji open-cycle power plant had returned to the national grid after being offline for three years.

Tegbe also cited upgrades to substations and transformers, including new transformers commissioned at Apapa, Ijora, Alausa and Lekki in Lagos. He said the interventions had unlocked 672MW of transmission capacity.

In Abuja, a new 300MVA transformer at Katampe was said to have unlocked an additional 240MW of transmission capacity.

The government is also pursuing renewable energy projects to diversify the country’s electricity supply.

According to Tegbe, a completed rural electrification portfolio delivered through the Rural Electrification Agency and its partners comprised 62 solar and mini-grid installations across 30 states.

The projects represented about 43.6MW of installed solar capacity and 41,735 new connections, with an estimated reach of more than 208,000 people.

The Special Adviser to the President on Power and Chairman of the Presidential Task Force on Power Sector Reset and Restoration, Dr Lanre Babalola, said Nigeria’s electricity reforms remained incomplete.

Babalola argued that the country’s challenge was not simply a shortage of generation capacity but its inability to consistently convert available capacity into reliable electricity and sustainable investment.

“Our deeper problem is that we have not yet built a system capable of consistently converting available capacity into reliable electricity, commercial value and sustainable investment,” he said.

He noted that Nigeria had unbundled its former vertically integrated electricity utility, privatised generation and distribution assets, and established a bulk electricity trader.

However, he said the transition to a competitive electricity market had not been completed.

Babalola described the single-buyer model as a transitional arrangement intended to support the market while participants developed the creditworthiness required for direct contracting.

He argued that maintaining the model indefinitely could constrain the sector’s development.

“The objective cannot be to preserve the institutions of transition indefinitely. The objective must be to complete the transition,” he said.

Reacting to the figures, lawyer and lead consultant on power sector issues at Sage Consulting, Bode Fadipe, questioned whether electricity consumers were receiving adequate service in return for the money they paid.

“What this data has just confirmed is that Nigerians have been paying for darkness,” Fadipe said.

He identified inadequate investment as a major obstacle to improved electricity supply and supported NERC’s directive requiring distribution companies, known as DisCos, to retain part of their revenue for investment in infrastructure.

Fadipe said DisCos had protested the directive but that the regulator had insisted on its implementation. However, he noted that the level of compliance remained an issue requiring verification.

He urged NERC to strengthen monitoring and enforcement, establish timelines for improvements and conduct forensic audits of investments by distribution companies to determine whether funds earmarked for infrastructure were being properly used.

He also called for cooperation between the regulator and market participants to improve debt recovery and ensure that investment obligations were met.

Consumer rights advocate and Executive Director of the Electricity Consumer Protection Advocacy Centre, Princewill Okorie, said the financial figures raised questions about the quality of electricity services delivered to customers.

Okorie said the decentralisation of the electricity sector under Nigeria’s new legal framework had brought regulation closer to consumers in the states.

However, he argued that enforcement of consumer protection provisions remained inadequate.

He identified estimated billing, infrastructure charges and alleged breaches of regulatory directives among the concerns facing electricity users.

According to Okorie, some communities had been required to contribute money towards transformers and other distribution infrastructure despite what he described as obligations on DisCos to provide such facilities.

He also challenged the use of poor consumer payment as a blanket explanation for inadequate service, arguing that the accuracy and transparency of electricity bills needed to be examined.

“The appropriate question to ask is: how did they generate these bills? Were they justifiably, accountably and transparently generated?” he said.

Okorie called for stronger enforcement of electricity regulations, greater public awareness of consumer rights and a dedicated mechanism for investigating alleged violations.

He also questioned the absence of a dedicated consumer protection unit within the Federal Ministry of Power and urged consumer protection authorities to do more to educate electricity users.

The advocate further argued that consumers already contribute to distribution infrastructure through payments or direct provision of equipment such as poles, cables and transformers, raising questions about the extent of utilities’ responsibilities and accountability.

Also read: Otedola hosts Hamzat, recalls sharing bunk bed 49 years ago

As the Federal Government moves to settle verified legacy debts, the debate over Nigeria’s electricity sector continues to centre on financial sustainability, market reform, infrastructure investment and the need to translate improved generation figures into more reliable power for consumers.