N3.14 Trillion Spent on Electricity Subsidy in 31 Months – FG

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N3.14 Trillion Spent on Electricity Subsidy in 31 Months – FG

The Federal Government says the massive spending shielded consumers from the full impact of tariff hikes, but critics question the value amid persistent blackouts and plans to phase out subsidies by 2027.

The President Bola Tinubu-led Federal Government has disclosed that it spent N3.14 trillion on electricity subsidies between June 2023 and December 2025, according to figures contained in its latest economic reform scorecard. The government said the intervention was designed to protect electricity consumers from the full effect of tariff increases as reforms in the power sector continued.

The electricity subsidy was among N30.64 trillion in additional spending pressures incurred by the Federal Government during the 31-month period. The figures were released by the Ministry of Finance following a presentation by Taiwo Oyedele, Minister of Finance and Coordinating Minister of the Economy.

According to the ministry, electricity subsidy payments rose sharply from N177 billion in 2023 to N1.48 trillion in 2024, representing an increase of more than 740 per cent. By December 2025, the subsidy bill stood at N1.47 trillion, indicating a marginal 1.14 per cent decline compared with the previous year.

Other major spending pressures recorded during the period included N9.39 trillion for wage adjustments and minimum-wage increases, N9.37 trillion arising from the impact of exchange-rate movements on external debt servicing, and N6.47 trillion for strategic infrastructure projects.

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The government said it mobilised N20.4 trillion in additional resources to partly finance the increased expenditure. The funds comprised N5.43 trillion from the Federal Government’s share of estimated petrol subsidy savings, N3.12 trillion in additional revenues, and N11.85 trillion raised through incremental borrowing. Despite these resources, the government said there was still a funding shortfall of N10.24 trillion, which had to be accommodated within the existing revenue base.

Despite the substantial subsidy spending, electricity supply deteriorated during the same period. According to the Nigerian Electricity Regulatory Commission (NERC), the Federal Government incurred an electricity tariff subsidy of N358.32 billion in the first quarter of 2026 alone. The subsidy bill averaged more than N119 billion per month as the government maintained its freeze on end-user electricity tariffs at July 2024 rates.

NERC explained that because electricity tariffs remain below cost-reflective levels, the government continues to subsidise the difference between the actual cost of power generation and the approved tariffs charged to consumers. Under the current Distribution Companies’ Remittance Obligation (DRO) framework, electricity generation companies invoiced the 11 DisCos a total of N689.72 billion during the quarter. However, only N331.40 billion was billed to the DisCos, leaving the government to cover the remaining N358.32 billion. The subsidy accounted for 51.95 per cent of the total generation invoice during the period.

The commission clarified that the lower subsidy payment in Q1 2026 did not result from the introduction of cost-reflective tariffs but rather from a decline in electricity purchased by the distribution companies during the quarter. According to the report, average available generation capacity fell by 17.45 per cent, dropping from 5,400.38MW in the fourth quarter of 2025 to 4,457.96MW in the first quarter of 2026. Total electricity generation also declined by 9.64 per cent to 8,883.47GWh.

The subsidy disclosure has drawn criticism from organised private sector groups. The Lagos Chamber of Commerce and Industry (LCCI) questioned the impact of the N15.8 trillion in petrol subsidy savings and criticised the N3.14 trillion electricity subsidy, saying it appeared to contradict the logic behind electricity tariff reforms and highlighted the high power costs that continue to burden businesses.

NERC has warned that the current subsidy regime leaves the Federal Government exposed to uncertain and potentially rising financial obligations. “The open-ended nature of the subsidy exposes the FGN to indeterminate subsidy obligations due to volumetric risk and changes in generation costs arising from changes in the generation mix, particularly with an increase in thermal generation,” the commission stated.

The disclosure comes against the backdrop of the Federal Government’s plan to gradually withdraw electricity subsidies from 2027. In July, Joseph Tegbe, Minister of Power, said the government had no immediate plan to increase electricity tariffs, explaining that subsidy payments would be gradually phased out from next year while ensuring that Nigerians continued to benefit from existing arrangements. “I promise you, next year, by God’s grace, we will put a stop to this so-called subsidy in the power sector,” Tegbe said.

The government has also proposed establishing a Power Consumer Assistance Fund (PCAF) , established under the Electricity Act 2023, as the preferred mechanism for delivering targeted subsidies directly to vulnerable electricity users. The initiative is designed to channel financial support through consumers’ electricity accounts or other verified identity-linked platforms, improving transparency in subsidy administration while boosting investor confidence in the sector.

However, analysts note that ending the subsidy without imposing another sharp tariff increase will require widespread metering, lower transmission and distribution losses, improved collections, reliable supply, and targeted protection for poorer households. The government is also working to clear debts owed to power generation companies, with GenCos reportedly owed about N6.5 trillion and receiving only about 35 per cent of their monthly invoices.

In April 2024, NERC raised electricity tariffs for Band A customers from N66 to N225 per kilowatt-hour. The affected consumers were expected to receive at least 20 hours of electricity daily, while the adjustment was projected to reduce the government’s subsidy burden by about N1.14 trillion in 2024. Despite this adjustment, the subsidy bill for 2024 and 2025 combined still reached nearly N3 trillion.