Nigeria's Power Paradox: Subsidies, Debt, and a Broken Market

Nigeria’s electricity sector is trapped in a deepening paradox: despite repeated tariff reforms and bold policy pronouncements, the cost of keeping the lights on for consumers is bleeding the state dry while failing to fix the system's core dysfunctions.

- 

New data from the Nigerian Electricity Regulatory Commission (NERC) lays bare the scale of the challenge. Between October 2024 and September 2025, the Federal Government incurred a staggering ₦1.98 trillion in electricity subsidy obligations, even as it struggles to settle more than ₦4 trillion owed to power generation companies (GenCos).

This figure alone underscores the unsustainability of Nigeria’s current electricity market structure. Subsidies of ₦471.69bn in Q4 2024, ₦536.4bn in Q1 2025, ₦514.35bn in Q2, and ₦458.75bn in Q3 show only marginal relief quarter-on-quarter. While the Q3 subsidy declined slightly, it still accounted for 58.63% of total generation invoices, meaning government effectively paid more than half the cost of power produced in the country.

At the heart of the problem is Nigeria’s failure to fully transition to cost-reflective tariffs. In the absence of tariffs that reflect real generation and delivery costs, the Federal Government continues to plug the gap between allowed tariffs and actual costs through subsidies. Even the highly publicised Band A tariff adjustment of April 2024, which removed subsidies for customers receiving a minimum of 20 hours of electricity supply daily, has failed to materially reduce the fiscal burden.