FG incurs N358.3bn electricity subsidy in Q1 — NERC

By Obas Esiedesa, Abuja

The Federal Government (FG) incurred an electricity tariff subsidy obligation of N358.32 billion in the first quarter of 2026 as it continued to bridge the gap between cost-reflective electricity tariffs and the rates paid by consumers, according to the latest report by the Nigerian Electricity Regulatory Commission (NERC).

The Commission, in its First Quarter 2026 report released on Monday, said the subsidy represented a N60.46 billion, or 14.44 per cent, decline from the N418.79 billion recorded in the fourth quarter of 2025, largely due to lower electricity offtake by distribution companies (DisCos) rather than improvements in tariff recover.

NERC explained that in the absence of cost-reflective tariffs, the FG covers the difference between the actual cost of electricity generation and the approved tariffs through tariff subsidies.

Under the current Distribution Companies’ Remittance Obligation (DRO) framework, the subsidy is applied to the generation costs payable by DisCos to the Nigerian Bulk Electricity Trading Plc, while the government directly settles the outstanding portion with the Federal Ministry of Finance.

According to the report, electricity generation companies invoiced a total of N689.72 billion for energy supplied to the 11 DisCos during the quarter. However, only N331.40 billion was billed to the DisCos under the DRO arrangement, leaving the Federal Government to shoulder the remaining N358.32 billion.

NERC said the subsidy accounted for 51.95 per cent of the total generation invoice during the quarter, a marginal decline from 52.03 per cent recorded in the preceding quarter.

“The key driver of this reduction in FGN subsidy obligation is the decrease in energy offtake of the DisCos by 8.56 per cent between 2025/Q4 and 2026/Q1,” the Commission stated.  

The report also showed that electricity distribution companies collected N597.56 billion out of the N756.93 billion billed to customers during the quarter, translating to a collection efficiency of 78.95 per cent, down slightly from 79.36 per cent recorded in the fourth quarter of 2025.  

Among the DisCos, Ikeja Electricity Distribution Company recorded the highest collection efficiency at 90.0 per cent, followed by Eko (89.64 per cent), Benin (85.16 per cent), Port Harcourt (81.22 per cent) and Abuja (80.90 per cent). Kaduna DisCo posted the lowest collection efficiency at 45.81 per cent.

While Jos, Kaduna, Kano, Port Harcourt and Benin DisCos improved their collection efficiencies compared with the previous quarter, the remaining six DisCos recorded declines, with Enugu posting the sharpest drop.