Despite federal government owing over N4trn to electricity utility companies, subsidy payment for electricity consumed in the first half of 2025 has increased to N1.186trn, analysis of monthly Multi Year Tariff Orders (MYTO) released by the Nigerian Electricity Regulatory Commission (NERC) has shown.

According to the order, the subsidy, which is owed to Electricity Distribution Companies (DisCos) increased by 27 per cent from the N935.81bn the government incurred in the second half of 2024 and 17 per cent increase from the N1.013tr incurred in the first half of 2024.

Daily Trust reports that while the money is owed to the DisCos, it belongs to the electricity generation companies (GenCos).

This is due to the DisCos being the revenue collection point of the Nigerian Electricity Market Industry (NESI), thus all money collected from electricity consumers are owned by Gencos, TCN and DisCos.

Breakdown of the subsidy indicated that the government owed N196.4bn in January, N193.09bn in February; N194.6bn in March; N198.4bn in April; N201.7bn in May and N201.8bn in June.

A further breakdown showed the Abuja Electricity Distribution Company (AEDC) got the highest amount of N170.6bn followed by Ikeja Electricity Distribution Company (IE) with N163.7bn, then Ibadan Electricity Distribution Company (IBEDC) with N144.7bn.

Others include Eko Electricity Distribution Company (EKDC), N137.7bn, Benin Electricity Distribution Company (BEDC) with N94.7bn, Enugu Electricity Distribution Company (EEDC) with N94.4bn; Port Harcourt Electricity Distribution Company (PHEDC) with N87.9bn; Kaduna Electricity Distribution Company (KAEDCO) with N87.2bn; Kano Electricity Distribution Company (KEDCO) with N85.08bn; Jos Electricity Distribution Company (JEDC) with N72.6bn and Yola Electricity Distribution Company (YEDC) with N47.1bn.

Why subsidy payment belongs to GenCos and N4trn debt

According to NERC, in the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff subsidies.

But for ease of administration, the subsidy is only applied to the generation cost payable by DisCos to NBET at source in the form of a DisCo’s Remittance Obligation (DRO).

It said the DRO represents the total GenCo invoice that is billed to the DisCos by Nigerian Bulk Electricity Trading plc (NBET) based on what the allowed DisCo tariffs can cover.

It would be recalled that the Association of Power Generating Companies (APGC), had in May threatened to shut down tools over the N4trn owed by the federal government in subsidy and legacy debt.

The subsidy payment, which was for 2024 was in the tune of N2trn while that of legacy debt was N2trn but the Minister of Power, Adebayo Adelabu, had promised to pay the debt following high-stakes talks between Power Minister, Adebayo Adelabu and Chairmen of Generating Companies of Nigeria (GenCos) in Abuja.

The statement signed by the media aide to the minister, Bolaji Tunji, said the move aims to avert an imminent collapse of the power infrastructure in the country.

It would be recalled that the GenCos had threatened to shut down operations if the debt was not paid.

But the minister assured the GenCos executives that the government would prioritide immediate payment of a significant amount out of the N4tr debt while the balance would be defrayed through other debt instruments.

When Daily Trust reached out to the media aide of the minister, Bolaji Tunji, he promised to get back as he doesn’t currently have the figure of what has been paid.

After several reminders, spanning 6 days, he did not respond to reminders sent to his WhatsApp contact.

Our reporter also reached out to a management staff of one of the GenCos who said the government is yet to pay any of the debt.

The staff member who pleaded anonymity as he is not authorised to speak with the press said: “You pay subsidy from the budget or appropriation but it is nowhere in the current budget so we don’t know how they are going to pay it. The last time we made a threat but right now we are in the process of engaging, so I can’t speak on that because it is on the high level between them and the owners of the generating companies.

Government does not have money to pay subsidy

Speaking with Daily Trust, A power sector analyst, Lanre Elatuyi, said the federal government does not have the money to pay for the subsidy it approved, adding that the liquidity issue in the sector would persist.

Elatuyi said, “Last year’s subsidy provision was about N450bn and I think that amount was even used to offset a 2023 subsidy. So, this year now, subsidy provision is N900 billion, which is all cash-backed, and subsidy burden to the government is in excess of almost N2tr. So, the bitter truth is that the government does not have money to pay subsidy, and that’s the essence of migrating some set of customers to band A so that they can pay cost-reflective tariff.

He noted that the challenge now is whether the government would have the political will to ask other categories of customers to pay cost-reflective tariffs.

He however said the pushbacks from those that were expected to have the wherewithal to afford cost-reflective tariff and living in highbrow areas are struggling to pay cost-reflective tariff of Band A, thus would be difficult for others to pay.

He added that with the way the market is now, the market is potentially at the transition stage.

“That’s why for some time now, NERC has been issuing orders on bilateral contracting for DisCos to deal directly with GenCos of their choice and contract bilaterally and agree on payment terms and other conditions.

“This will migrate the market from this current stage of single buyer model or central buyer model, where NBET is the one in between GenCos and Discos, to a more liberalised and competitive electricity market.

He added that with states granted the autonomy to regulate their electricity ecosystem, “The question is will states still provide subsidies for their population? So, I think that will play out by next year. But as far as 2025 is concerned, the government is still liable to pay that subsidy”.

On whether the GenCos could shut down their operation if the debt continues to accrue, he said it won’t be possible as most DisCos are still owned by the same owners.

“The people that own GenCos and DisCos are the same. They’re not going to shut down now and I don’t think the government would allow that.

On his part, the Executive Director of PowerUp Nigeria, Adetayo Adegbemle, said the failure to activate the Power Consumer Assistance Fund (PCAF) by the first quarter of 2025 represents a significant setback in resolving Nigeria’s electricity liquidity crisis.

He noted that with subsidies ballooning to N200bn monthly and GenCos receiving only 39% of their invoices by December 2024, the sector risks deeper instability.

“However, this delay need not spell collapse. A combination of adaptive policies, stakeholder collaboration, and accelerated reforms can still steer the sector toward recovery. To bridge the PCAF gap, the government must immediately establish an emergency liquidity facility backed by multilateral development partners or sovereign guarantees. This fund could temporarily cover a portion of the subsidy burden while fast-tracking PCAF’s operationalisation.

“Simultaneously, NERC should mandate DisCos to ring-fence revenue from Band A customers (who pay higher tariffs) exclusively for settling GenCos’ invoices, ensuring at least 50% payment compliance. Such measures would prevent further erosion of investor confidence and keep gas suppliers engaged.

He said contributions from government and eligible customers (per the Electricity Act) should be frontloaded, with NERC publishing a clear, shortened timeline for rollout and to incentivise participation, industrial customers could receive tax rebates for timely PCAF contributions, while low-income households gain priority access to the N5,000 monthly support.

“Public campaigns explaining PCAF’s benefits—such as stabilised tariffs and direct bill relief—would mitigate resistance and foster buy-in. Even without PCAF, phased tariff adjustments remain critical. NERC could introduce sub-band categorisations within Band A, linking tariffs more granularly to exchange rates and inflation. For instance, industries with dedicated supply lines might pay closer to cost-reflective rates, while residential Band A users benefit from temporary caps. Concurrently, a lifeline tariff buffer—funded by a levy on high-energy commercial users—could shield vulnerable households from abrupt hikes. This balances revenue generation with social equity.”