Nigeria’s electricity subsidy obligation could approach ₦2 trillion in 2026 as the Federal Government maintains its decision against an immediate increase in electricity tariffs, placing additional pressure on public finances.

The projection comes amid rising electricity supply costs, persistent revenue shortfalls and growing concerns over the financial sustainability of the power sector.

Minister of Power Joseph Tegbe has said the government has no immediate plans to increase electricity tariffs, explaining that its priority is to improve power supply, strengthen infrastructure and build a commercially viable electricity market while protecting vulnerable consumers.

The Nigerian Electricity Regulatory Commission (NERC), in its 2025 Annual Report, disclosed that the Federal Government incurred ₦1.93 trillion in electricity subsidy obligations last year.

The amount represented 57.44 per cent of the ₦3.36 trillion invoice issued by the Nigerian Bulk Electricity Trading Company (NBET), translating to an average monthly subsidy burden of approximately ₦160.69 billion.

The subsidy arises because electricity tariffs approved for consumers remain below the actual cost of supplying power, leaving the government to cover the difference.

Power Generators Raise Concerns Over Mounting Debt

The growing subsidy burden has renewed concerns about the accumulation of unpaid obligations across Nigeria’s electricity value chain.

Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies (APGC), has questioned whether the Federal Government’s ₦4 trillion Presidential Power Sector Debt Reduction Programme will prevent fresh liabilities from accumulating.

According to Ogaji, the debt-reduction initiative addresses legacy obligations up to December 2024, while new unpaid bills continue to emerge.

She warned that total outstanding liabilities could exceed ₦7 trillion if the situation is not addressed, stressing the need for a more sustainable electricity subsidy framework.

Ogaji also argued that subsidy commitments require clear budgetary provisions, urging the government to determine the level of support it can afford and make adequate funding arrangements.

Her concerns highlight the risk that continued subsidies, without corresponding funding and improved revenue collection, could deepen the sector’s liquidity challenges.

FG Prioritises Power Sector Reforms Over Tariff Increases

Tegbe said the government’s initial 100 days in office have focused on identifying longstanding challenges, stabilising electricity infrastructure and restoring discipline across the power market.

The minister identified inadequate gas supply, ageing generation facilities, delayed maintenance and stalled infrastructure projects as major obstacles to reliable electricity generation.

He also highlighted challenges within the transmission network, including vandalised power lines, overloaded equipment and frequent system disruptions.

According to Tegbe, electricity generation companies receive only about 27 per cent of the invoices issued across the market, limiting their ability to maintain power plants and settle payments to gas suppliers.

The government is therefore pursuing reforms aimed at addressing these structural problems before considering further tariff adjustments.

Distribution Inefficiencies Deepen Financial Pressure

Weak revenue collection remains a major challenge for electricity distribution companies (DisCos), limiting their ability to meet financial obligations across the power sector.

The persistent gap between electricity supplied, revenue collected and payments made to generating companies continues to undermine the market’s financial stability.

With the government maintaining its tariff freeze, the subsidy burden is expected to remain a major fiscal concern as electricity supply costs and outstanding liabilities continue to weigh on the sector.

Sustainability of Electricity Subsidies in Focus

The prospect of a ₦2 trillion electricity subsidy bill has intensified calls for a clearer and more sustainable funding framework.

While maintaining affordable electricity tariffs offers some protection to consumers, the growing cost of subsidies presents challenges for public finances and the long-term viability of the electricity market.

The debate now centres on how the government can balance consumer protection with the need to improve electricity supply, strengthen revenue collection and ensure that power-sector obligations are adequately funded.

For Nigeria, addressing these competing demands will be central to preventing further debt accumulation while working towards a more financially sustainable electricity market.

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