Nigeria’s power sector crisis worsened in the final quarter of 2025, with subsidy obligations rising to N418.79 billion and inefficiency-driven losses exceeding N300 billion, according to a new report by the Nigerian Electricity Regulatory Commission (NERC).
The report paints a troubling picture of a sector weighed down by non-cost-reflective tariffs, weak remittances, and persistent operational inefficiencies.
Subsidy burden remains heavy
NERC disclosed that electricity generation companies (GenCos) issued invoices totaling N804.93 billion for power supplied during the quarter. However, the Federal Government covered over half of the cost—52.3 percent—due to regulated tariffs, leaving a subsidy bill of N418.79 billion.
Although this represents a slight drop from the previous quarter, the commission warned that the current subsidy regime remains unsustainable and exposes government finances to uncertainty.
Over N300bn lost to inefficiencies
Despite government intervention, the sector recorded massive commercial and technical losses. Of the N969.19 billion worth of electricity supplied to distribution companies (DisCos), only N795.06 billion was billed to customers, reflecting a billing efficiency of 82.03 percent.
This gap resulted in billing losses of N174.12 billion.
In addition, high Aggregate Technical, Commercial and Collection (ATC&C) losses—averaging 34.9 percent—led to a further N139.19 billion in lost revenue.
Combined, these inefficiencies pushed total sector losses beyond N300 billion within the three-month period.
Declining remittances, weak collections
Financial performance also deteriorated, with DisCos remitting only N437.27 billion out of the N471.66 billion owed to upstream market participants. This represents a remittance rate of 92.71 percent, down from 95.21 percent in the previous quarter.
Energy accounting gaps persisted, as DisCos received 7,991.22GWh of electricity but billed customers for just 6,614.57GWh.
Grid instability and capacity challenges
Operational challenges continued to plague the sector, with average available generation capacity dropping slightly to 5,400.38MW. At least 17 power plants recorded reduced output during the quarter.
While total generation improved to 9,831.58GWh, grid stability remained a concern. Frequency and voltage levels consistently fell outside standard limits, and a partial grid collapse was recorded on December 29.
Mounting pressure for reforms
NERC warned that the current structure—particularly the open-ended subsidy framework—poses long-term fiscal risks.
The report noted that the modest reduction in subsidy during the quarter was partly driven by increased electricity supply to premium Band A customers, whose allocation rose from 40 to 45 percent.
However, analysts say deeper structural reforms, including cost-reflective tariffs, improved metering, and tighter loss controls, are critical to stabilising Nigeria’s power sector and reducing the growing financial burden on the government.
