The Federal Government’s electricity tariff subsidy obligation reached N1.92 trillion in 2025, as authorities continued to absorb the widening gap between cost-reflective electricity tariffs and the rates paid by consumers across the country, according to the Nigerian Electricity Regulatory Commission.
NERC’s 2025 industry report placed the gross tariff subsidy obligation at N1.928 trillion for the year, representing 57.44 per cent of the total Nigerian Bulk Electricity Trading invoice. This translates to an average monthly subsidy obligation of N160.69 billion, with the burden distributed unevenly across the year. Brandspur Brand News understands that the subsidy stood at N536.40 billion in the first quarter, N514.36 billion in the second quarter, N458.76 billion in the third quarter and N418.79 billion in the fourth quarter.
The 2025 figure represents a slight decline from the N1.949 trillion recorded in 2024, despite the Federal Government’s directive to freeze customer electricity tariffs at the July 2024 approved rates. NERC attributed the gradual reduction in quarterly subsidy obligations to reduced energy off-take by electricity distribution companies compared with previous quarters, as well as an increase in the proportion of energy allocated to Band A customers, whose share rose from 40 per cent to 45 per cent in the fourth quarter of 2025.
The commission stated that the government incurred the subsidy obligation due to the absence of cost-reflective tariffs across all DisCos, adding that the burden was largely attributable to the government’s policy of freezing allowed tariffs paid by customers despite increases in cost-reflective tariffs. The N1.928 trillion obligation means the government is effectively subsidising more than half of the actual cost of electricity generation and distribution, a burden that ultimately falls on the national budget and limits fiscal space for other critical infrastructure and social investments.
For ordinary Nigerians, the tariff freeze has provided some relief from what would otherwise be significantly higher electricity bills, but at a considerable cost to public finances. The heavy subsidy also raises questions about the sustainability of the current tariff structure and whether the government can continue to absorb such massive costs without crowding out other essential spending or accumulating further fiscal deficits. The slight decline in the subsidy burden in 2025, driven largely by reduced energy consumption and a shift in energy allocation toward higher-band customers, suggests that structural changes to the power sector could gradually reduce the government’s subsidy exposure.
However, the N1.92 trillion figure underscores the scale of the challenge facing Nigeria’s electricity sector, where the gap between what consumers pay and what it costs to produce and distribute power remains enormous. The report indicates that any move toward cost-reflective tariffs would require either significant increases in consumer bills or sustained government intervention to keep rates affordable, presenting policymakers with a difficult balancing act between fiscal sustainability and consumer protection.
