The Federal Government may spend N2.36tn on electricity subsidies for low-income consumers in 2025 as it continues its efforts to reform Nigeria’s power sector. This comes despite plans to introduce a cost-reflective tariff that aligns with the true cost of power generation and distribution, 9am news report.
The Nigerian Electricity Regulatory Commission (NERC) disclosed that the government incurred N178.03bn in electricity subsidies in January 2025, marking a 10.1% decline from the N197.91bn spent in December 2024. The reduction is attributed to a minor tariff review that adjusted key indices, including an exchange rate of N1,556 to the dollar and an inflation increase to 34.6%.
Despite these adjustments, the government still bears the financial burden of electricity subsidies. In 2024, only N450bn was cash-backed out of the N2.37tn subsidy cost, leaving an outstanding balance of N1.92tn. Without the tariff review approved by President Bola Tinubu in April 2024, the subsidy would have risen to N3.2tn—accounting for 11.64% of the total federal budget.
Consumers under the Abuja Electricity Distribution Company were the largest beneficiaries of the subsidy, receiving N28.38bn in January. Ikeja Disco followed with N27.2bn, while Eko Disco benefited from N22.88bn. Other regional Discos also received substantial allocations, with Ibadan Disco getting N24.03bn and Port Harcourt Disco N14.59bn.
To ensure the long-term financial sustainability of the power sector, the government is implementing a phased approach to cost-reflective tariffs. A document presented at the recent energy compact summit in Tanzania outlined plans for an annual $600m subsidy from 2025 to 2027. This temporary measure aims to bridge the gap between cost-reflective tariffs and regulated electricity rates while addressing Nigeria’s metering deficit.
By 2027, the subsidy will be phased out, except for a social tariff designed to protect low-income and vulnerable consumers. However, challenges remain, as many Nigerians resist higher electricity tariffs, citing poor power supply and economic hardship. Consumer advocacy groups argue that tariff increases should only follow significant improvements in electricity generation and distribution.
The ongoing debate over subsidy removal reflects the broader challenges facing Nigeria’s power sector, including inadequate infrastructure, funding constraints, and the political sensitivity of electricity pricing. While the government aims to create a financially viable power market, balancing economic sustainability with consumer affordability remains a critical issue.
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