Electricity Debt Hits ₦377bn as FG Shoulders ₦358bn Tariff Subsidy in Q1 2026
By Eyo Nsima
The Federal Government spent ₦358.32 billion on electricity tariff subsidies in the first quarter of 2026 as Nigeria’s power sector continued to battle huge financing gaps despite improved payment performance by electricity distribution companies (DisCos).
The latest First Quarter 2026 report of the Nigerian Electricity Regulatory Commission (NERC) shows that the electricity market remained heavily dependent on government intervention, with subsidies accounting for more than half of the total cost of electricity generated during the period.
According to the Commission, the subsidy was necessary because electricity tariffs remain below cost-reflective levels, leaving the government to bridge the difference between the actual cost of power generation and the amount consumers are charged.
FG shoulders over half of electricity generation cost
NERC disclosed that electricity generated for the eleven DisCos attracted a total invoice of ₦689.72 billion during the first quarter.
However, only ₦331.40 billion was billed to the DisCos under the Distribution Companies’ Remittance Obligation (DRO) framework, while the Federal Government assumed responsibility for the remaining ₦358.32 billion as tariff subsidy.
The subsidy represents 51.95 per cent of the total generation cost, underscoring the extent to which the Nigerian electricity market relies on public funding to remain operational.
Although still substantial, the subsidy declined by ₦60.46 billion, or 14.44 per cent, from ₦418.79 billion recorded in the fourth quarter of 2025.
NERC attributed the reduction primarily to an 8.56 per cent decline in electricity offtake by the distribution companies during the review period.
DisCos still owe nearly ₦19 billion
Despite the subsidy support, the report revealed that the DisCos failed to fully settle their payment obligations to the Nigeria Bulk Electricity Trading Plc (NBET).
Out of the ₦331.40 billion invoiced under the DRO arrangement, the DisCos collectively remitted ₦312.48 billion, leaving an outstanding debt of approximately ₦18.92 billion for the quarter.
This translated to a market remittance performance of 94.29 per cent, an improvement over the 93.04 per cent recorded in the preceding quarter.
While the improved remittance rate signals stronger payment discipline, the unpaid balance continues to add to liquidity challenges within the Nigerian Electricity Supply Industry (NESI).
Why the subsidy persists
NERC explained that because tariffs are not yet fully cost-reflective, the government absorbs the portion of generation costs that consumers are unable to cover through electricity tariffs.
To prevent mounting debts on the books of the DisCos, Nigeria adopted the Distribution Companies’ Remittance Obligation (DRO) framework in January 2024, replacing the former Minimum Remittance Obligation (MRO) regime.
Under the previous MRO arrangement, DisCos received invoices for the full cost of electricity but were only required to pay a prescribed minimum amount, leaving subsidy-related debts on their balance sheets until government payments were made.
The current DRO model eliminates that burden by allowing NBET to invoice the Federal Ministry of Finance directly for the subsidy component, while the DisCos are expected to pay 100 per cent of their adjusted obligations.
According to NERC, the policy was introduced to improve the financial health of the distribution companies and enhance their ability to raise capital for network expansion and infrastructure upgrades.
Abuja, Ikeja account for highest obligations
Among the electricity distribution companies, Abuja Electricity Distribution Company recorded the highest total generation invoice of ₦113.43 billion, with a final DRO-adjusted obligation of ₦58.49 billion.
It was followed closely by Ikeja Electric, whose total generation invoice stood at ₦110.84 billion, while its adjusted obligation amounted to ₦57.76 billion.
Other major obligations included:
Eko DisCo – ₦84.63 billion generation invoice; ₦42.37 billion DRO.
Ibadan DisCo – ₦84.12 billion generation invoice; ₦40.54 billion DRO.
Benin DisCo – ₦58.57 billion generation invoice; ₦29.59 billion DRO.
Enugu DisCo – ₦55.93 billion generation invoice; ₦26.80 billion DRO.
Port Harcourt DisCo – ₦47.08 billion generation invoice; ₦20.64 billion DRO.
The smallest obligations were recorded by Yola DisCo, with a generation invoice of ₦18.76 billion and a DRO-adjusted invoice of ₦6.32 billion.
Liquidity challenge remains
Although payment performance has improved since the introduction of the DRO framework, analysts note that the electricity market continues to suffer from structural liquidity shortages.
The sector remains constrained by a combination of below-cost tariffs, heavy government subsidy commitments, unpaid market obligations and the need for sustained investments in generation, transmission and distribution infrastructure.
With the Federal Government absorbing more than half of electricity generation costs every quarter, experts warn that the long-term sustainability of the current subsidy regime will depend on broader reforms, including tariff rationalisation, improved operational efficiency and stronger revenue collection across the electricity value chain.
The NERC report suggests that while the DRO framework has reduced the accumulation of subsidy debts on the balance sheets of the DisCos, Nigeria’s power sector still faces significant financial pressures, with billions of naira in unpaid obligations and continued dependence on government funding to keep the lights on.
