Nigeria’s electricity subsidy bill hits N358bn despite persistent blackouts

The Federal Government is expected to spend N358.32 billion on electricity subsidies in the first quarter of 2026, despite continued blackouts and operational difficulties across Nigeria’s power sector.

The subsidy bill averaged more than N119 billion per month as the government maintained its freeze on end-user electricity tariffs.

According to the Nigerian Electricity Regulatory Commission (NERC) in its First Quarter 2026 Report, the subsidy resulted from the Federal Government’s decision to keep electricity tariffs at the July 2024 rate rather than adopt cost-reflective pricing.

The report showed that the tariff shortfall reached N126.48 billion in January, N116.34 billion in February and N115.50 billion in March, bringing the total electricity subsidy for the quarter to N358.32 billion.

NERC noted that although the subsidy burden fell by N60.46 billion, or 14.44 percent, from the N418.79 billion recorded in the fourth quarter of 2025, the Federal Government will still shoulder more than half of the electricity generation costs.

“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N358.32 billion. This represents a N60.46 billion (14.44 percent) decline compared with the N418.79 billion recorded in the fourth quarter of 2025.

“The government subsidy accounted for 51.95 percent of the total GenCo invoice, representing a marginal decline from 52.03 percent in the previous quarter. The reduction was primarily driven by an 8.56 percent drop in electricity offtake by the distribution companies between the fourth quarter of 2025 and the first quarter of 2026.”

The regulator clarified that the lower subsidy requirement was not due to the introduction of cost-reflective electricity tariffs. Instead, it reflected a reduction in the volume of electricity purchased by distribution companies during the review period.

NERC said electricity generated in the first quarter attracted invoices worth N689.72 billion. However, because the Federal Government continued to subsidise electricity tariffs, the Nigerian Bulk Electricity Trading Plc (NBET) billed distribution companies only N331.40 billion, while the government absorbed the remaining N358.32 billion.

“The invoice payable by the DisCos to NBET for the first quarter of 2026 stood at N331.40 billion because the Federal Government assumed responsibility for approximately 52 percent (N358.32 billion) of the total generation cost through subsidies arising from the continued freeze of end-user tariffs at the July 2024 rates,” the report stated.

The commission explained that under the current electricity market framework, subsidies are applied at source through the remittance obligations of the distribution companies, while the Federal Government settles the outstanding portion of generation costs directly.

“In the absence of cost-reflective tariffs, the government covers the gap between the approved tariff and the actual cost of electricity through tariff subsidies.

“For administrative convenience, the subsidy applies only to the generation costs payable by DisCos to NBET through their remittance obligations. NBET then invoices the Federal Ministry of Finance directly for the outstanding portion of generation costs not covered by the DisCos,” the report added.

NERC also cautioned that the existing subsidy arrangement leaves the Federal Government vulnerable to unpredictable and potentially increasing financial obligations.

“The open-ended nature of the subsidy exposes the Federal Government to uncertain subsidy liabilities due to fluctuations in electricity volumes and changes in generation costs, particularly as the share of thermal power generation increases,” the commission said.

The regulator further disclosed that all three supplementary tariff orders issued during the quarter retained end-user electricity tariffs at the July 2024 levels, in line with the Federal Government’s electricity subsidy policy.

Despite the substantial subsidy spending, electricity supply deteriorated during the quarter. Average available generation capacity fell by 17.45 percent, dropping from 5,400.38MW in the fourth quarter of 2025 to 4,457.96MW in the first quarter of 2026. Total electricity generation also declined by 9.64 percent to 8,883.47GWh, while average hourly generation fell by 7.64 percent to 4,112.72MWh/h.

The report further revealed that the national grid experienced two major disturbances during the quarter, triggering widespread power outages across the country.

“There were two incidents of system disturbance on the national grid during the first quarter of 2026. A total grid collapse occurred on 23 January 2026, while a partial collapse followed on 27 January 2026,” the commission stated.

According to NERC, the total grid collapse was caused by the separation of the busbar at the Sapele Transmission Station, while preliminary findings indicated that the partial collapse resulted from inadequate reactive power support needed to maintain voltage stability across the national grid.