Government says protecting vulnerable consumers remains a priority, as power-sector debts, gas shortages and weak revenue collection continue to weigh on the electricity market…..
The Federal Government could spend close to N2 trillion on electricity subsidies in 2026 if it maintains its decision not to immediately increase electricity tariffs.
Minister of Power, Joseph Tegbe, disclosed this position on Monday in Abuja while speaking to journalists to mark his first 100 days in office.
Tegbe said the government currently had no plans to raise electricity tariffs in the immediate future, stressing that efforts were instead being directed towards creating a commercially sustainable power sector while shielding vulnerable consumers from higher costs.
“There are no immediate plans to increase electricity tariffs. Our goal is to build a commercially viable power sector while protecting vulnerable consumers,” Tegbe said.
The position comes after the Federal Government incurred a N1.93 trillion electricity subsidy obligation in 2025, according to figures contained in the Nigerian Electricity Regulatory Commission’s 2025 Annual Report.
NERC said the subsidy represented 57.44 per cent of the total invoice issued by the Nigerian Bulk Electricity Trading Plc during the year, with the government’s obligation averaging N160.69 billion monthly.
The regulator attributed the subsidy burden to the continued gap between the cost of producing electricity and the tariffs approved for consumers.
Under the current arrangement, the government covers the difference between the cost-reflective tariff and the lower tariff paid by eligible consumers.
“In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff subsidies,” NERC said.
The commission noted that the government’s N1.93 trillion subsidy obligation in 2025 accounted for 57.44 per cent of the total NBET invoice for the year.
With the government ruling out an immediate tariff increase, the subsidy bill could remain around the N2 trillion mark in 2026.
The subsidy burden has remained substantial despite the introduction of the Band A to E tariff classification in 2024. While Band A customers are generally charged tariffs designed to reflect the cost of electricity, consumers in other categories continue to benefit from government support.
The latest position has also renewed concerns over the financial sustainability of the power sector.
Earlier, electricity generation companies raised questions over the effectiveness of the Federal Government’s N4 trillion Presidential Power Sector Debt Reduction Programme, warning that additional liabilities could exceed N7 trillion before the initiative is fully implemented.
The Association of Power Generation Companies said settling existing debts through bonds would not, on its own, resolve the liquidity problems confronting the Nigerian Electricity Supply Industry, as new obligations continue to accumulate.
APGC Chief Executive, Joy Ogaji, said the outstanding N4 trillion debt only covered obligations up to December 2024, leaving fresh liabilities from 2025 and 2026.
“Every month, the DisCos are not paying 100 per cent. NBET is not paying 100 per cent. The N4tn legacy debt is until December 2024. So, how about the accumulation for 2025? And what is already accumulated for 2026? So by the time you finish issuing this N4tn bond over seven years, by 2033, two times what you’re going to pay would have accumulated. So what is your plan?” Ogaji asked.
She also questioned the sustainability of the existing subsidy arrangement, arguing that the government had yet to make adequate budgetary provisions to support it.
“One of the sustainable ways is for the Federal Government to acknowledge the fact that they cannot subsidise the power market. Because you can see it’s only on paper that the government is subsidising power. It’s not in the budget.
“There is no monetary provision anywhere for subsidies, not even in the supplementary budget; it’s nowhere. It’s just being. You said you would pay. We have not seen it,” she said.
Ogaji called for a clearly defined subsidy framework based on what the government could realistically afford, with the necessary allocations made in the national budget.
She argued that maintaining an open-ended subsidy system had contributed to the accumulation of debts across the electricity value chain.
Meanwhile, Tegbe said the government was working to address the structural problems that have continued to affect the power sector, including debt, revenue leakages, inadequate metering and infrastructure deficiencies.
The minister said his first 100 days in office, covering June 8 to September 16, had focused largely on identifying the major weaknesses across the electricity value chain, stabilising existing infrastructure and restoring discipline within the market.
According to him, inadequate gas supply remains one of the major constraints on electricity generation, with damaged pipelines and unfavourable commercial conditions discouraging investment in the gas-to-power chain.
He added that ageing generation equipment, delayed maintenance and stalled projects had also prevented available generation capacity from reaching consumers.
Payment challenges have further compounded the problem, with generation companies reportedly receiving only 27 per cent of their bills.
“When President Bola Tinubu entrusted me with the responsibility of serving as Minister of Power, I made four promises to Nigerians. I promised a disciplined approach to solving the sector’s problems. I promised to pursue grid stability through structured, strategic reforms. I promised visible incremental improvements.
“Upon assuming office, the diagnosis we undertook at the onset revealed constraints at every segment of the electricity value chain. Gas supply to power stations was limited by damaged pipelines and commercial terms that discouraged investment.
“Our generation fleet was heavily dependent on thermal plants, with ageing equipment, deferred maintenance, stalled projects, and capacity unable to reach consumers. The sector diagnosis revealed payment of only 27 per cent of generation companies’ bills, undermining their ability to maintain plants and pay gas suppliers,” Tegbe stated.
The minister said transmission infrastructure was also facing serious challenges, including vandalised towers and lines, overstretched equipment and repeated system trips.
NERC said the existing subsidy mechanism was designed to ensure that the gap between the cost-reflective tariff and the approved consumer tariff did not become an additional burden on electricity distribution companies.
Under the arrangement, the subsidy is applied to the generation cost payable by DisCos to NBET, while the portion of the generation cost not covered by the DisCos is invoiced to the Federal Ministry of Finance for settlement.
According to the regulator, the framework was partly introduced to prevent unpaid subsidy obligations from piling up on the balance sheets of DisCos, which could weaken their ability to secure financing for investments in their distribution networks.
The N1.93 trillion obligation recorded in 2025 therefore underscores the financial cost of keeping electricity tariffs below the actual cost of supplying power.
For consumers, the government’s decision to keep tariffs unchanged in the immediate term means that the subsidy system is likely to remain a major feature of the electricity market as authorities attempt to improve revenue collection, infrastructure, gas availability and overall service delivery.
