NERC: FG Paid N458.75 billion Electricity Subsidy in Three Months

• Discos record N570.2bn revenue, bill customers N706.6bn

•International customers offset $7.1m out of $18.69m invoice

Emmanuel Addeh in Abuja

Despite implementing the band ‘A’ tariff system, the federal government paid N458.75 billion in subsidies to operators in the electricity value chain in the third quarter of 2024, fresh data from the Nigerian Electricity Regulatory Commission (NERC) has shown.

Also, the information contained in the apex electricity regulatory body’s quarterly report indicated that Distribution Companies (Discos) collected N570.21 billion out of the total of N706.61 billion billed to customers during the period covering July, August and September last year.

The subsidy arose from the continued freezing of certain end-use customer tariffs at the rates payable in July 2024, despite rising generation costs, the report added, with the Discos showing marginal improvements in billing and collection efficiencies.

The report showed that during the period under review, the naira value of total energy offtake by all Discos was N854.53 billion. Also, a billing efficiency of 82.69 per cent was posted,  representing an improvement of 1.08 percentage points over the 81.61 per cent recorded in Q2 of 2025.

Besides, the report stated that Discos recorded a cumulative billing losses of N147.92 billion during the period, with a collection efficiency of 80.70 per cent, which was up by 4.63 per cent from the 76.07 per cent in the previous quarter.

“Prompt payment of upstream invoices is critical for securing the availability of generation and transmission capacities. The waterfall regime pushes Discos to boost their collections because most of their allowed revenues rank below the payment of market obligations in the waterfall.

“In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap between the cost-reflective and allowed tariff in the form of tariff subsidies. For ease of administration, the subsidy is only applied to the generation cost payable by Discos to NBET at source in the form of a Disco’s Remittance Obligation (DRO).

“…It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N458.75 billion. This represents a N55.59 billion (10.81 per cent) reduction in FGN subsidy compared to 2025/Q2 (N514.35 billion).

“The subsidy obligation of the government decreased in naira terms (N55.59 billion), and accounted for 58.63 per cent of the total Gencos’ invoice, which is a 0.97 per cent decrease compared to 2025/Q2 when subsidy accounted for 59.60 per cent of the total Genco invoice.

“This is because while the allowed end-user tariffs remained unchanged across the quarters, there was a 6.08 per cent decrease in energy offtake by the Discos during the quarter, as well as a reduction in actual generation cost (N/kWh) by 0.98 per cent,” the Q3 report stated.

Besides, during the period under consideration, international bilateral customers paid only $7.125 million out of the $18.69 million invoiced by the Market Operator (MO) for services rendered in the quarter, representing a remittance rate of 38.09 per cent.

Similarly, domestic bilateral customers paid N3.19 billion out of N3.64bn invoiced, achieving a stronger remittance rate of 87.61 per cent.

The report revealed that although the total energy received by all Discos in 2025/Q3 was 7,348.95GWh, the energy billed to end-use customers was only 6,158.54GWh. This translated to an overall energy accounting efficiency of 83.80 per cent and represented a 1.37 per cent increase compared to 2025/Q2 of 82.43 per cent.

“Collection efficiency is the ratio of the amount that has been collected from customers relative to the amount billed to them by the Discos. The significant under-recovery of the invoices issued to customers by Discos is driven by a lack of willingness of customers to pay bills when due, customer dissatisfaction with Discos’ services and inadequate customer metering, among other challenges,” the NERC report added.

In 2025/Q3, Ikeja Disco recorded the highest collection efficiency of 100 per cent, while three  other Discos recorded collection efficiencies greater than 80 per cent, that is (Eko; 88.74 per cent, Benin; 86.44 per cent and Abuja; 81.60 per cent).

“Conversely, Kaduna Disco recorded the lowest collection efficiency at 45.67 per cent . A comparison of Discos’ performance shows that Ikeja (+17.58pp), Port Harcourt (+8.83pp), Yola (+8.72pp), Abuja (+5.24pp), Jos (+4.90pp), Eko (+0.94pp) and Benin (+0.89pp) Discos recorded improvements in collection efficiency between 2025/Q2 and 2025/Q3.

“The remaining four Discos recorded declines in collection efficiency, with Kaduna (-2.70pp) and Ibadan (-1.34pp) Discos having the most significant declines across the quarters,” the NERC report added.