FG absorbs over half of electricity costs as power sector bleeds N300bn — NERC

The Nigerian Electricity Regulatory Commission says the Federal Government spent N418.79bn on power subsidies in the fourth quarter of 2025, as inefficiencies across the electricity value chain drove losses beyond N300bn in the same period.

The figures are contained in NERC’s 2025 fourth-quarter report, which also flagged declining remittances, high distribution losses, grid instability, and a marginal drop in available generation capacity.

According to the report, generation companies invoiced a total of N804.93bn for electricity produced during the quarter. Because tariffs remain below cost-reflective levels, the government absorbed 52.30 per cent of that bill — equivalent to N418.79bn — leaving distribution companies to pay only N386.13bn.

The commission noted that the subsidy figure, while substantial, represented a N39.96bn decline compared to the third quarter of 2025.

Despite government intervention, the sector recorded deep commercial losses. The total value of electricity supplied to distribution companies stood at N969.19bn, but DisCos billed customers only N795.06bn — a billing efficiency of 82.03 per cent and a billing loss of N174.12bn.

Aggregate technical, commercial, and collection losses compounded the problem. The weighted average ATC&C loss across all DisCos stood at 34.9 per cent, translating to an additional revenue loss of N139.19bn. Together, the two loss streams pushed inefficiency-driven losses beyond N300bn for the quarter.

DisCos received 7,991.22GWh of electricity but billed customers for only 6,614.57GWh, reflecting persistent energy accounting gaps.

Remittance performance also weakened. DisCos were required to pay N471.66bn to upstream market participants but remitted only N437.27bn — a compliance rate of 92.71 per cent, down from 95.21 per cent in Q3.

On the operational side, available generation capacity averaged 5,400.38 megawatts, a slight decline from Q3, with 17 power plants recording reduced output during the quarter.

Generation volumes, however, improved. Average hourly generation rose to 4,452.71MWh/h — a 6.55 per cent increase — bringing total generation for the quarter to 9,831.58GWh.

Grid stability remained a concern. System frequency levels fell outside prescribed operating limits, and a partial grid collapse occurred on December 29, the only recorded system disturbance during the quarter.

NERC warned that the current subsidy framework poses a fiscal risk, saying the “open-ended subsidy regime leaves the Federal Government exposed to indeterminate subsidy obligations,” driven by generation cost variations and supply mix changes.

The commission noted that the Q4 subsidy reduction was partly due to an increase in energy allocated to Band A customers — those on premium feeders — from 40 per cent to 45 per cent.