NIGERIA’s power sector continues to face deep financial and operational challenges, with the Federal Government incurring a subsidy obligation of N418.79bn in the fourth quarter of 2025, even as inefficiencies across the electricity value chain resulted in losses exceeding N300bn during the same period.
This was disclosed in the fourth-quarter 2025 report released by the Nigerian Electricity Regulatory Commission, which highlighted declining remittances, persistent distribution losses, grid instability, and a marginal decline in available generation capacity.
According to the report, generation companies issued total invoices amounting to N804.93bn for electricity produced within the quarter. However, due to tariffs that do not reflect actual costs, the government absorbed 52.30 per cent of the total generation cost.
The commission explained that “due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N418.79bn,” noting that this represented a reduction of N39.96bn, or 8.71 per cent, compared to the subsidy recorded in the third quarter of 2025.
The report further indicated that the subsidy covered more than half of total generation costs, leaving distribution companies responsible for only N386.13bn. It added that the government’s share accounted for 52.30 per cent of total generation invoices, reflecting a 6.60 percentage point decline from the previous quarter.
Despite this intervention, the sector continued to record significant commercial inefficiencies. While electricity supplied to distribution companies was valued at N969.19bn, only N795.06bn was billed to end users.
“The naira value of total energy offtake by all DisCos in 2025/Q4 was N969.19bn, while total energy billed stood at N795.06bn, translating to a billing efficiency of 82.03 per cent,” the report stated.
This performance represents a slight decline of 0.66 percentage points from the 82.69 per cent recorded in the third quarter. Consequently, distribution companies recorded cumulative billing losses of N174.12bn during the period.
Further compounding the situation were high aggregate technical, commercial, and collection (ATC&C) losses, which stood at a weighted average of 34.9 per cent. These losses translated to an additional revenue shortfall of N139.19bn across all distribution companies.
Combined, billing losses of N174.12bn and ATC&C losses of N139.19bn pushed total inefficiency-driven losses beyond N300bn for the quarter.
The report also highlighted persistent energy accounting challenges. Although distribution companies received 7,991.22 gigawatt-hours (GWh) of electricity, only 6,614.57GWh was billed to customers.
“Although total energy received by all DisCos in 2025/Q4 was 7,991.22GWh, the energy billed to end-use customers was only 6,614.57GWh,” the commission noted.
Collection performance also declined during the period, with remittances to upstream market participants weakening. Out of a required remittance of N471.66bn, distribution companies paid N437.27bn, leaving an outstanding balance of N34.39bn.
This translates to a remittance performance of 92.71 per cent in the fourth quarter, compared to 95.21 per cent in the third quarter of 2025.
On operational metrics, the commission reported that available generation capacity averaged 5,400.38 megawatts, reflecting a slight decline from the previous quarter, with 17 power plants recording reduced output levels.
However, overall energy generation improved. Average hourly generation rose to 4,452.71 megawatt-hours per hour, resulting in total generation of 9,831.58GWh.
“The average hourly generation of grid-connected power plants increased by 273.56MWh/h, representing a 6.55 per cent improvement,” the report stated.
Despite this improvement, concerns over grid stability persisted. System frequency and voltage levels frequently fell outside prescribed operational limits.
“In 2025/Q4, the average lower daily system frequency was 49.38Hz, while the upper daily average was 50.65Hz, both outside normal operating limits,” the commission said.
The report also recorded one system disturbance during the quarter, noting that a partial grid collapse occurred on December 29.
Looking ahead, the commission warned that the current subsidy framework exposes government finances to uncertainty due to its open-ended nature.
“The current open-ended subsidy regime leaves the Federal Government exposed to indeterminate subsidy obligations,” it stated, citing fluctuations in generation costs and supply mix as key factors.
The report added that the slight reduction in subsidy during the quarter was partly driven by increased energy allocation to premium Band A customers, which rose from 40 per cent to 45 per cent.
“The key driver of this reduction is the increase in energy allocated to Band A customers from 40 per cent to 45 per cent,” the commission concluded.
Overall, the findings underscore the persistent structural and financial challenges within Nigeria’s electricity sector, despite ongoing government intervention
