In 2024, the Federal Government of Nigeria incurred a staggering ₦1.95 trillion in electricity subsidy costs, according to the Nigerian Electricity Regulatory Commission’s (NERC) latest annual report.
The subsidy shortfall resulted from the gap between the actual cost of generating and delivering electricity (cost-reflective tariff) and the lower, government-approved end-user tariffs. As the report indicates, the Federal Government stepped in to absorb this difference through what NERC described as tariff shortfall funding.
However, the report stopped short of confirming whether the government has fully paid the subsidy.
Quarterly Breakdown of Subsidy Burden
A closer look at the data reveals a fluctuating trend in the subsidy amounts throughout the year:
- Q1 2024: ₦633 billion
- Q2 2024: ₦380 billion
- Q3 2024: ₦464 billion
- Q4 2024: ₦471 billion
These figures point to continued fiscal pressure on the government as it attempts to maintain a balancing act between protecting consumers and ensuring sector liquidity.
Revenue Surge for Discos Despite Lower Energy Supply
While the government struggles with subsidy payments, Distribution Companies (Discos) reported a 40% year-on-year revenue surge in April 2025, driven by increased tariffs rather than higher electricity supply.
In April alone, total billing stood at ₦257.57 billion, with actual collections reaching ₦199.85 billion, yielding a collection efficiency of 77.6%, an improvement over March’s 71.1% performance.
Despite this revenue spike, the total energy received by Discos dropped by 9.2% to 2,622.46 GWh, and energy billed to customers fell by 5.8% to 2,184.61 GWh. The revenue increase was largely attributed to higher tariffs, particularly for Band A customers, who saw their rates jump from ₦66/kWh to ₦209/kWh following the April 2024 pricing adjustment.
This tariff adjustment was a central component of ongoing power sector reforms aimed at:
- Reducing subsidy reliance
- Improving cash flows to operators
- Attracting long-term private investment
Sector Still Faces Major Efficiency and Collection Challenges
In Q1 2025, total sector billing hit ₦744.27 billion, with ₦553.63 billion collected, putting the quarterly collection efficiency at 74.4%, slightly lower than the 77.4% posted in Q4 2024.
Cumulatively, over the four months ending April 2025, the total billing reached approximately ₦1.02 trillion, yet the sector suffered a ₦260 billion under-recovery, reflecting persistent issues such as:
- Consumer payment difficulties
- Energy poverty
- Uneven power supply
Perhaps most concerning is the continued high level of Aggregate Technical, Commercial, and Collection (ATC&C) losses, which stood at 39.6% in Q1 2025 almost double the 20.5% target set under the Multi-Year Tariff Order (MYTO). These losses translated to an estimated ₦200.5 billion in forgone revenue.
Performance Snapshot: Leading Discos in April 2025
- Eko Disco: Achieved 100% collection rate with ₦38.7 billion, a 28.82% increase
- Ikeja Disco: Collected ₦34.68 billion, up 6.1%
- Abuja Disco: Recorded ₦30.27 billion, down 4.3%
Despite revenue improvements, sector-wide financial sustainability remains tenuous, underscoring the urgent need for deeper reforms, better metering, stricter enforcement, and accelerated infrastructure investments.
