Nigeria’s Power Sector Set to Face Crisis as Subsidies Hit N1.92 Trillion

Nigeria’s power sector is on the brink of a major crisis due to outstanding government subsidies, which have now surged to N1.92 trillion, according to PowerUp Nigeria, a power sector advocacy group.

A report indicates that federal government subsidies to the Nigerian Electricity Supply Industry (NESI) reached this figure by the end of 2024, with Electricity Distribution Companies (DisCos) struggling to improve revenue collection.

Executive Director of PowerUp Nigeria, Adetayo Adegbemle, expressed concerns over the federal government’s failure to activate the Power Consumer Assistance Fund (PCAF) within the first quarter of 2025, calling it a significant setback in addressing the sector’s liquidity crisis.

“With subsidies ballooning to N200 billion monthly and Generation Companies (GenCos) receiving only 39 percent of their invoices by December 2024, the sector risks deeper instability. However, this delay need not lead to a total collapse. A combination of adaptive policies, stakeholder collaboration, and accelerated reforms can still steer the sector toward recovery,” Adegbemle stated.

He suggested that to bridge the PCAF gap, the government should immediately establish an emergency liquidity facility backed by multilateral development partners or sovereign guarantees. This fund, he said, could temporarily cover a portion of the subsidy burden while fast-tracking PCAF’s implementation. Additionally, he urged the Nigerian Electricity Regulatory Commission (NERC) to mandate DisCos to allocate revenue from Band-A customers (who pay higher tariffs) exclusively for settling GenCos’ invoices, ensuring at least 50 percent payment compliance.

A report by NERC in its Q4 2024 electricity sector review revealed that DisCos remitted only N336.6 billion out of the total N832.6 billion invoiced by the Nigerian Bulk Electricity Trading Company (NBET), leaving a significant shortfall. The DisCos’ Remittance Obligation (DRO) for the quarter stood at N360.9 billion.

Furthermore, the report disclosed that foreign countries supplied with electricity by Nigerian GenCos paid only 37 percent of the $14.05 million worth of power sent to them. Six international bilateral customers made a payment of just $5.21 million against the cumulative invoice of $14.05 million issued by the Market Operator (MO) for services rendered in Q4 2024.