The figure represents a ₦39.96 billion decline—about 8.7%—from the ₦458.75 billion subsidy recorded in the third quarter, signalling modest progress in efforts to rebalance the country’s power market finances.
Subsidy still covers over half of generation costs
Despite the reduction, government support remains a dominant feature of the electricity value chain. Subsidies accounted for 52.3% of total invoices issued by power generation companies (GenCos) in Q4, though this marked a drop from 58.63% in the previous quarter.
At the core of this system is the role of Nigerian Bulk Electricity Trading Plc (NBET), which acts as an intermediary—purchasing electricity from GenCos and invoicing distribution companies (DisCos). The government steps in to bridge the gap between actual generation costs and the tariffs DisCos are allowed to charge consumers.
NERC explained that this support is implemented through the DisCo Remittance Obligation (DRO), a mechanism that adjusts invoices to reflect what DisCos can realistically pay under current tariff structures.
Tariff adjustments and Band A strategy
The regulator attributed the drop in subsidy partly to increased energy allocation to Band A customers—those receiving more reliable power supply—which rose from 40% to 45% during the quarter.
This policy reflects the government’s broader strategy to improve service quality while gradually moving toward more cost-reflective tariffs, thereby reducing reliance on subsidies over time.
Strong but slightly declining remittance performance
In financial terms, NBET issued a total DRO-adjusted invoice of ₦386.13 billion to DisCos in Q4 2025. Of this, ₦359.27 billion was remitted, translating to a 93.04% remittance performance.
While still relatively strong, this marks a decline from the 95.23% performance recorded in Q3, when ₦308.25 billion was paid out of ₦323.70 billion invoiced.
DisCos performance varies
A breakdown of DisCo remittances shows a mixed picture across operators. Several companies—including Abuja, Eko, Enugu, Ikeja, and Port Harcourt DisCos—maintained a perfect 100% remittance record.
However, others fell short of full compliance:
- Yola – 99.42%
- Benin – 98.30%
- Ibadan – 95.58%
- Kano – 75.14%
- Jos – 49.80%
- Kaduna – 40.73%
Quarter-on-quarter analysis revealed improvements for Benin and Kaduna DisCos, while Kano, Jos, Ibadan, and Yola recorded declines in performance.
The bigger picture
NERC reiterated that in the absence of fully cost-reflective tariffs, government intervention remains necessary to sustain the electricity market. Subsidies are currently applied at the generation level to simplify administration and ensure continuity of supply.
However, the data underscores a persistent structural challenge: Nigeria’s power sector still relies heavily on public funding to remain operational, even as reforms aim to improve efficiency, cost recovery, and service delivery.
The Q4 figures suggest incremental progress, but also highlight the long road ahead in transitioning to a financially self-sustaining electricity market.