Tariff Gap Persists as Power Subsidy Hits ₦418bn Despite Market Reforms
The Federal Government incurred a subsidy obligation of ₦418.79 billion in the fourth quarter of 2025, according to the latest report by the Nigerian Electricity Regulatory Commission (NERC).
In its 2025 Q4 report, NERC stated that the total amount invoiced by Generation Companies (GenCos) for energy supplied to Distribution Companies (DisCos), alongside the Differential Remittance Obligation (DRO)-adjusted invoice issued by Nigerian Bulk Electricity Trading Plc (NBET), reflected a ₦39.96 billion (8.71%) reduction compared with the ₦458.75 billion recorded in Q3 2025.
Government subsidy accounted for 52.30% of the total GenCo invoice in Q4, representing a 6.60 percentage point decline from 58.63% in the preceding quarter. NERC attributed this reduction to increased energy allocation to Band A customers—from 40% to 45%—in line with the government’s strategy to enhance electricity supply quality.
During the period, the DRO-adjusted invoice from NBET to DisCos stood at ₦386.13 billion, with total remittances reaching ₦359.27 billion, translating to a 93.04% remittance performance. This compares with Q3 2025, when DisCos remitted ₦308.25 billion out of ₦323.70 billion, achieving a higher performance rate of 95.23%.
NERC explained that, in the absence of cost-reflective tariffs, the government bridges the gap between actual generation costs and allowed tariffs through subsidies. “For ease of administration, the subsidy is applied at source to the generation cost payable by DisCos to NBET via the DisCo Remittance Obligation,” the report noted.
The DRO represents the portion of GenCo invoices that DisCos are required to settle, based on tariff allowances. In addition, DisCos are mandated to remit 100% of invoices received from the Market Operator (MO) for transmission and administrative services.
Disaggregated data showed that most DisCos achieved full remittance compliance in Q4, except Yola (99.42%), Benin (98.30%), Ibadan (95.58%), Kano (75.14%), Jos (49.80%), and Kaduna (40.73%).
Quarter-on-quarter analysis indicated improvements in remittance performance for Benin (+3.53 percentage points) and Kaduna (+0.56pp), while Kano (-23.60pp), Jos (-15.34pp), Ibadan (-4.42pp), and Yola (-0.58pp) recorded declines. Abuja, Eko, Enugu, Ikeja, and Port Harcourt DisCos maintained 100% remittance across both quarters.
