The Nigerian power sector remained under intense financial strain in the final quarter of 2025, as the Federal Government incurred a subsidy burden of N418.79bn while inefficiencies across the electricity value chain triggered losses exceeding N300bn, according to the latest report by the Nigerian Electricity Regulatory Commission.
The commission’s fourth-quarter report paints a picture of a sector weighed down by non-cost-reflective tariffs, weak revenue collection, and persistent operational inefficiencies, despite marginal improvements in generation output.
According to the report, electricity generation companies issued invoices totalling N804.93bn for power supplied during the quarter. However, due to tariffs that do not reflect actual production costs, the Federal Government absorbed 52.30 per cent of the total bill, leaving distribution companies responsible for just N386.13bn.
The regulator noted that while the subsidy figure represented a reduction of N39.96bn compared to the previous quarter, it still underscores the heavy fiscal burden placed on government finances to sustain electricity supply.
Despite this intervention, the sector recorded significant commercial and technical losses. Electricity supplied to distribution companies was valued at N969.19bn, but only N795.06bn was billed to end-users, translating to a billing efficiency of 82.03 per cent—slightly lower than the 82.69 per cent recorded in the third quarter.
This shortfall resulted in billing losses of N174.12bn within the period, further compounding the sector’s financial challenges.
In addition to billing gaps, high aggregate technical, commercial, and collection (ATC&C) losses continued to erode revenues. The report revealed that the weighted average ATC&C loss across all distribution companies stood at 34.9 per cent, amounting to N139.19bn in lost revenue.
Combined, both billing inefficiencies and ATC&C losses pushed total inefficiency-driven losses beyond N300bn for the quarter, highlighting deep structural issues in the distribution segment of the electricity market.
Energy accounting gaps also persisted. While distribution companies received 7,991.22 gigawatt-hours of electricity during the quarter, only 6,614.57 gigawatt-hours were billed to customers, indicating that a substantial portion of supplied energy was either unaccounted for or lost within the system.
Collection performance also declined, reflecting ongoing challenges in revenue recovery. Distribution companies were expected to remit N471.66bn to upstream market participants but managed to pay only N437.27bn, leaving an outstanding balance of N34.39bn. This translates to a remittance performance of 92.71 per cent, down from 95.21 per cent in the previous quarter.
On the operational side, available generation capacity averaged 5,400.38 megawatts, marking a slight decline compared to the third quarter, with 17 power plants recording reduced output levels.
However, overall energy generation improved. Average hourly generation rose to 4,452.71 megawatt-hours per hour, resulting in total generation of 9,831.58 gigawatt-hours for the quarter, representing a 6.55 per cent increase in output.
Grid stability, however, remained a concern. System frequency and voltage levels continued to fall outside prescribed operational limits, raising questions about the resilience of the national grid. The report recorded one incident of system disturbance during the quarter, including a partial grid collapse on December 29.
The commission warned that the current subsidy framework remains unsustainable, describing it as an open-ended system that exposes government finances to uncertainty. It noted that fluctuations in generation costs and supply mix could further increase subsidy obligations if structural reforms are not implemented.
According to the report, the slight reduction in subsidy recorded during the quarter was partly driven by increased energy allocation to premium electricity users under Band A feeders, which rose from 40 per cent to 45 per cent.
While this adjustment may ease some pressure on public finances, the broader picture remains one of a sector struggling with systemic inefficiencies, weak financial flows, and infrastructure limitations.
The findings reinforce ongoing concerns among industry stakeholders that without cost-reflective tariffs, improved metering, and stronger enforcement of market discipline, Nigeria’s electricity sector will continue to rely heavily on government intervention while delivering suboptimal performance.
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