Nigeria’s government electricity subsidy ballooned to nearly N2 trillion in 2024, representing a sharp increase over the prior year’s N610 billion, amid persistent macroeconomic shocks and policy measures that have frozen consumer electricity tariffs despite rising underlying costs. The Nigerian Electricity Regulatory Commission detailed that the subsidy exists to compensate for the difference between official consumer tariff rates and the cost-reflective tariffs that mirror true expenses borne by electricity distribution companies.
The substantial jump in subsidy obligations was driven in large part by the Nigerian naira’s devaluation following its June 2024 float, escalating costs for imported generation equipment and gas—a key fuel source priced in foreign currency. The removal of fuel subsidies fueled inflation, compounding the pressure on electricity costs.
Throughout 2024, the government maintained retail tariffs at the December 2022 approved rates, which deepened the subsidy gap. The peak subsidy for the first quarter rose to N633 billion, over three times the 2023 quarterly average. A tariff adjustment for Band A customers in April reduced the subsidy burden mid-year, but the freeze of tariffs from July led to renewed increases in later quarters, with Q4 subsidy obligations reaching approximately N472 billion.
Detailed data points reveal Abuja DisCo as the largest beneficiary of subsidies, receiving about N285 billion, while Yola DisCo faced the highest cost-reflective tariff price, due to regional challenges such as vandalism and insecurity.
Despite the government’s subsidy commitments, actual payments were minuscule, with only N371 million disbursed by year-end, covering less than 0.02 percent of the total amount owed. The nonprofit Nigerian Bulk Electricity Trading Plc is the intermediary tasked with collecting remittances from DisCos and channeling government subsidies to power generation companies, which face mounting debts nearing N5 trillion.
Experts warn this situation is unsustainable. Power sector analyst Bode Fadipe noted, “A dollar-denominated cost base combined with a falling naira means subsidy demand will continue to rise if tariffs remain frozen.” He further stressed the complexity of removing the subsidy altogether without triggering rampant power theft and worsening sector instability.
Business magnate Aliko Dangote has called for greater private sector involvement to boost generation capacity beyond current low levels. He pointed to the Dangote Group’s internal 1,500MW capacity as an example of untapped potential in the country’s power landscape.