Nigeria’s Federal Government could spend about ₦2 trillion on electricity subsidies in 2026 as it maintains a freeze on consumer electricity tariffs, placing another major financial burden on the country’s already strained power sector. The projection comes as the government says there are no immediate plans to increase electricity tariffs.
The latest figure follows a ₦1.93 trillion electricity subsidy obligation recorded in 2025, according to the Nigerian Electricity Regulatory Commission’s (NERC) 2025 Annual Report. That amount represented 57.44 percent of the total Nigerian Bulk Electricity Trading (NBET) invoice for the year, with the government covering the difference between the cost of supplying electricity and the tariffs permitted to be charged to consumers.
Government Keeps Electricity Tariffs Frozen.
Power Minister Joseph Tegbe said the government has no immediate plans to increase electricity tariffs, arguing that the priority is to stabilise the sector and improve its commercial viability while protecting consumers from higher energy costs.
The decision means the government will continue absorbing a substantial portion of the cost of electricity for consumers who pay tariffs below cost-reflective levels.
Nigeria introduced its Band A–E electricity tariff structure in 2024, with Band A customers paying tariffs closer to the cost of supplying power. Customers in other categories continue to receive varying levels of subsidy.
₦1.93 Trillion Was Already Owed in 2025.
NERC’s latest annual report highlights the scale of the subsidy problem. The ₦1.93 trillion obligation in 2025 averaged approximately ₦160.69 billion per month.
Under the existing framework, electricity distribution companies are expected to pay the Nigerian Bulk Electricity Trading company for power supplied to them. Where the approved consumer tariffs do not cover the full cost, the Federal Government is responsible for the resulting gap.
The government therefore effectively becomes the financier of the difference between what electricity costs to generate and what many consumers are allowed to pay.
Power Sector Debt Continues to Grow.
The subsidy issue is unfolding alongside a much wider liquidity crisis in Nigeria’s electricity industry. The government has raised approximately ₦1.23 trillion toward a programme aimed at addressing a broader power-sector debt estimated at about ₦3.3 trillion.
Power generation companies, however, have warned that settling historic debts alone will not solve the problem because new liabilities continue to accumulate across the electricity value chain.
Joy Ogaji, chief executive of the Association of Power Generation Companies, has questioned how the sector can become financially sustainable if distribution companies and other participants continue to make incomplete payments. She argued that the government needs to establish clearly how much subsidy it can actually afford and provide corresponding budgetary provisions.
Nigeria’s Power Supply Faces Structural Problems.
The subsidy burden is also linked to deeper problems affecting electricity generation and distribution.
Tegbe said the government’s assessment of the sector found constraints ranging from inadequate gas supplies and damaged pipelines to ageing generation equipment, deferred maintenance and stalled infrastructure projects. Transmission infrastructure is also facing problems including vandalised towers, overstretched equipment and repeated system disruptions.
The minister also said generating companies were receiving only about 27 percent of their invoices, a situation that makes it difficult for them to maintain their facilities and meet payments to gas suppliers.
The Challenge for Nigeria’s Electricity Market.
The projected ₦2 trillion electricity subsidy illustrates the difficult balance facing Nigeria’s government. Keeping tariffs under control protects consumers from immediate price increases, but it transfers a large portion of the electricity system’s costs to public finances.
At the same time, eliminating subsidies or rapidly moving towards full cost-reflective tariffs could increase household and business electricity costs.
The government is therefore attempting to address the problem through debt settlement, improved revenue collection, infrastructure repairs, better metering and efforts to stabilise gas supplies before making further decisions on electricity pricing.
For Nigeria, the central question is increasingly how to build an electricity market that can finance reliable power without allowing subsidy obligations and unpaid debts to continue accumulating across the sector.
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