Electricity subsidy hits N1.05trn, nearly wipes out DisCos’ half-year revenue

Nigeria’s electricity subsidy bill has ballooned to N1.05 trillion in the first half of 2025, nearly wiping out the N1.12 trillion total revenue generated by the nation’s 11 electricity distribution companies (DisCos) in the same period. The latest Proshare Research report paints a troubling picture of a sector caught between rising costs, policy interventions, and an unsustainable subsidy regime.

The subsidy, meant to bridge the gap between cost-reflective tariffs and what consumers are allowed to pay, reflects Nigeria’s persistent struggle to balance affordability with economic reality. While the Federal Government insists the subsidy protects vulnerable households and industries, analysts warn that the policy is draining public finances and discouraging private investment.

Analysis by Proshare Research showed that DisCos’ revenue collection grew from N720 billion in the first half of 2024 to N1.12 trillion in H1 2025, boosted by the tariff adjustment for Band A consumers and improved collection efficiency, which rose to 76.07 per cent. Yet, subsidy costs climbed in tandem, rising from N1.01 trillion in H1 2024 to N1.05 trillion in H1 2025.

Liquidity constraints remained acute. For every N100 billed, about N25 is lost to poor remittance, consumer dissatisfaction, and electricity theft. Industrial giants such as Ajaokuta Steel reportedly made no remittance for power consumed in the second quarter of the year.

In July 2025 alone, DisCos recorded a revenue shortfall of N49.18 billion, despite marginal gains in billing and collection efficiency, according to data from the Nigerian Electricity Regulatory Commission (NERC). The gap was driven by the difference between the allowed average tariff of N116.25/kWh and the actual average collection of N89.30/kWh — a recovery efficiency of just 76.82%.

Metering also improved slightly, with the national rate rising to 54.3% after 412,792 new installations in the first half of the year. Still, about half of Nigeria’s 11.8 million registered electricity consumers remain unmetered, perpetuating estimated billing and widespread discontent.

The liquidity shortfall has compounded the sector’s debt woes. Generation companies (GenCos) recovered only 28 per cent of their outstanding debts in 2024, while total unpaid obligations have soared beyond N4 trillion — including N2 trillion owed for 2024 supplies and N1.9 trillion in legacy arrears.

Although President Bola Tinubu approved the securitisation of the N4 trillion liability earlier this year, analysts argue that the fiscal relief has been neutralised by surging subsidy costs.

Power generation remains stagnant at 5,396 megawatts (MW) as of June 2025 — less than half of the nation’s installed capacity of about 13,000MW. Hydropower contributed roughly 30%, with gas-fired plants generating the bulk of electricity supplied to the grid.

In response to deep-seated inefficiencies, the Federal Government has rolled out several reform initiatives. Chief among them are the National Integrated Electricity Policy (NIEP) and the Nigeria Integrated Resource Plan (NIRP), both targeting a cumulative $122 billion investment by 2045, including $29 billion projected over the next 20 years.

Other major interventions include Mission 300 — a $32.8 billion programme supported by the World Bank, African Development Bank (AfDB), and private investors — and ongoing talks with China’s Exim Bank for a $2 billion “super grid” loan facility.

More than $2 billion in financing has already been mobilised through various platforms: the $750 million World Bank DARES initiative for off-grid projects, the $500 million NSIA RIPLE fund for renewable energy investment, and a $190 million JICA facility for power infrastructure support.

Despite these moves, sector experts argue that Nigeria’s investment landscape remains fragmented. As Minister of Power Adebayo Adelabu noted in May, the country requires $10 billion annually for 20 years to achieve stable electricity. Yet, between 2015 and 2024, total power-related foreign direct investment stood at just $1.02 billion — barely 1% of the required annual inflow.

The Electricity Act (Amendment) Bill 2025, currently before the National Assembly, seeks to recapitalise the DisCos with N500 billion and pave the way for a re-privatisation process. The Bureau of Public Enterprises (BPE) also plans to list two DisCos and one GenCo on the Nigerian Stock Exchange through Initial Public Offerings (IPOs) to enhance transparency and attract private capital.

NERC has additionally granted partial regulatory authority to 15 states — including Lagos, Edo, and Oyo — to strengthen sub-national oversight. However, the overlapping powers between state and federal regulators continue to generate uncertainty and delay implementation.

In the renewable energy space, over $400 million in new investments have been secured for solar and off-grid expansion. A partnership involving the Rural Electrification Agency, InfraCorp, and Dutch company Solarge BV will establish a 1,000MW solar panel factory under the Renewed Hope Infrastructure Development Fund.

Despite government interventions and ambitious investment targets, analysts say results remain largely on paper. Structural inefficiencies, low cost recovery, and high subsidy dependence continue to define Nigeria’s electricity landscape.

“The government’s efforts are commendable, but the outcomes are yet to reflect on the ground,” Proshare Research observed. “A private sector-led model anchored on transparency, competition, and public-private partnerships is essential for sustainable power delivery.”

For now, the sector remains trapped in a cycle where revenue gains are swiftly eroded by the cost of keeping the lights on — a sobering reminder of the urgent need for deeper structural reform.