The Federal Government incurred an electricity subsidy obligation of N358.32 billion in the first quarter of 2026 as it continued to freeze end-user tariffs, despite weaker power supply and recurring grid disturbances that disrupted electricity across the country.
The figures, contained in the Nigerian Electricity Regulatory Commission (NERC)’s First Quarter 2026 Report, underscore the mounting fiscal burden of sustaining electricity tariffs below cost-reflective levels while exposing persistent structural weaknesses in the power sector.
According to the report, the subsidy amounted to N126.48 billion in January, N116.34 billion in February, and N115.50 billion in March, averaging more than N119 billion monthly.
Although the subsidy bill declined by 14.44 per cent from N418.79 billion recorded in the fourth quarter of 2025, NERC attributed the reduction to lower electricity purchases by distribution companies (DisCos) rather than any improvement in the tariff regime.
The commission explained that electricity tariffs remained frozen at the rates approved in July 2024, leaving the Federal Government responsible for bridging the gap between actual generation costs and revenues recovered from consumers.
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N358.32 billion,” the regulator said.
NERC disclosed that electricity generated during the quarter attracted invoices worth N689.72 billion. However, the Nigerian Bulk Electricity Trading Plc (NBET) billed DisCos only N331.40 billion, with the Federal Government expected to settle the outstanding N358.32 billion.
The regulator said the subsidy represented 51.95 per cent of the total generation invoice, compared with 52.03 per cent in the preceding quarter.
It explained that subsidies are applied through the DisCos’ remittance obligations to NBET, while the balance is invoiced directly to the Federal Ministry of Finance for settlement.
NERC warned that the arrangement leaves the government exposed to unpredictable fiscal liabilities because subsidy obligations fluctuate with electricity demand and changes in generation costs.
“The open-ended nature of the subsidy exposes the FGN to indeterminate subsidy obligations due to volumetric risk and changes in generation costs,” the commission stated.
The report also showed that operational performance weakened during the quarter.
Average available generation capacity fell by 17.45 per cent to 4,457.96 megawatts (MW) from 5,400.38MW recorded in the previous quarter.
Total electricity generated declined by 9.64 per cent to 8,883.47 gigawatt-hours (GWh), while average hourly generation dropped by 7.64 per cent to 4,112.72 megawatt-hours per hour (MWh/h).
The quarter was further marked by two national grid disturbances that triggered widespread power outages.
According to NERC, the grid suffered a total collapse on January 23 following the separation of a busbar at the Sapele Transmission Station, while a partial collapse occurred on January 27, with preliminary investigations attributing the incident to inadequate reactive power support required to maintain grid voltage stability.
Despite the operational setbacks, the commission noted that all three supplementary tariff orders issued during the quarter retained electricity tariffs at July 2024 levels, in line with the Federal Government’s subsidy policy.
The latest figures highlight the difficult balance between shielding consumers from higher electricity costs and ensuring the financial sustainability of Nigeria’s power market, where operators have repeatedly argued that cost-reflective tariffs are essential to attract investment and improve service delivery.