• Government covered 59.16% of billed power costs with CFA536.4 billion in subsidies

• Debt to power producers now exceeds 4 trillion naira, straining the energy sector

• Reforms continue under President Tinubu amid persistent supply and infrastructure issues

The Nigerian government allocated 536.4 billion naira ($350 million) to electricity subsidies in the first quarter of 2025, according to a recent report by the Nigerian Electricity Regulatory Commission (NERC). This marks an increase of 64.7 billion naira from the 471.69 billion naira disbursed in the final quarter of 2024.

These subsidies covered 59.16% of the total cost billed by the Nigerian Bulk Electricity Trading Plc (NBET) to distribution companies (DisCos). To manage this funding support, the government operates a system called the “remittance obligation framework,” which outlines the portion each DisCo must pay NBET based on regulated consumer tariffs. The balance, considered a subsidy, is paid by the federal government directly to NBET, which then forwards the funds to electricity generation companies (GenCos). NBET subsequently submits the invoice to the Federal Ministry of Finance for payment.

Despite this framework, Energy Minister Adebayo Adelabu has repeatedly acknowledged that the government is struggling to meet its financial obligations. This has led to rising debt across the electricity value chain. The government currently owes more than 4 trillion naira to power producers, a situation that severely threatens the stability and sustainability of the sector.

This imbalance comes amid a challenging economic environment. Since taking office on May 29, 2023, President Bola Tinubu has introduced several economic reforms, including the removal of fuel subsidies and the unification of the naira exchange rate, aimed at reviving Africa’s largest economy.

The Nigerian power sector continues to face serious challenges: an outdated transmission network, gas shortages, rising debt among generation and distribution companies, and repeated vandalism targeting infrastructure.

Although the country’s installed capacity is estimated at 12,500 megawatts, only about one-quarter of that is actually available. As a result, a significant share of households and businesses still rely heavily on costly and polluting diesel generators.