Electricity subsidies in Nigeria jumped by over 200% in just one year — rising from N610 billion in 2023 to a staggering N1.94 trillion in 2024 — yet the federal government has only managed to pay a tiny fraction: just N371 million, or 0.019% of the total.

This massive spike happened despite an increase in electricity tariffs for Band A customers earlier in 2024. According to the Nigerian Electricity Regulatory Commission (NERC), the jump in subsidy spending was caused by a combination of factors — including the floating of the naira, the removal of fuel subsidies, and soaring inflation. These changes made power generation much more expensive, while the government kept electricity prices for most customers frozen at older rates.

“Because tariffs were not adjusted to match the actual cost of electricity, the government had to cover the gap — and that gap became N1.94 trillion in 2024,” NERC said in its latest report.

In the first quarter of the year alone, the government’s subsidy burden hit N633.3 billion, which was nearly four times more than what was paid per quarter in 2023. After tariffs were raised for Band A customers (who use more power and get better supply), the subsidy bill dropped to N380 billion in Q2. But the government later froze electricity prices again in July — and the subsidy costs shot back up in the second half of the year.

By the end of 2024, the subsidy bill had risen to N471.7 billion in Q4.

Despite all this, the government paid just N371 million of the total N1.94 trillion it owed in subsidies. This shortfall has left power generation companies (GenCos) struggling to stay afloat. Some reports say the total debt owed to GenCos is now close to N5 trillion.

Where’s the money going?

Most of the subsidy went to cover the gap between the actual cost of generating power (known as cost-reflective tariffs) and what customers were officially charged (allowed tariffs). For example, while the actual cost of supplying one kilowatt-hour of electricity averaged N175.31, customers only paid around N100.27 — meaning the government had to cover the N75 difference for every unit of electricity consumed.

Subsidy breakdown across major electricity distribution companies (DisCos) in 2024 shows:

Abuja DisCo – N285bn

Ikeja DisCo – N272bn

Ibadan DisCo – N236bn

Eko DisCo – N231bn

Benin DisCo – N169bn

Yola DisCo had the highest cost per unit due to challenges like insecurity and vandalism. Because their customer tariffs weren’t any higher than others, the government had to pay almost double the average subsidy to keep power flowing there.

Power sector expert warns of long-term danger

Speaking on the issue, power sector expert Bode Fadipe said the situation was becoming unsustainable.

“Most equipment and fuel used in Nigeria’s power sector are imported and priced in US dollars. So when the naira falls, the cost of generating electricity rises sharply,” he said.
“Without adjusting tariffs, the government ends up footing the bill. And if the subsidy isn’t paid, GenCos start accumulating debt.”

He warned that if nothing changes, Nigeria’s power sector might remain stuck in crisis for another 20 to 30 years.

“The government already owes N4 trillion to GenCos. If the N1.94 trillion from 2024 is separate, that’s over N6 trillion in total debt,” Fadipe said.

He also expressed concern that completely removing subsidies without fixing the system could lead to more electricity theft, especially from people who can’t afford higher tariffs.

“Tariff increases alone won’t fix the power crisis. We need a complete overhaul of how the sector works,” he said.

Dangote urges local investment in power

Meanwhile, Aliko Dangote, President of the Dangote Group, called on Nigerian investors to stop sending their money abroad and instead invest in the country’s struggling power sector.

“We generate over 1,500 megawatts just for our own use. That’s more than what many states in Nigeria get. Nigeria as a country should be generating at least 50,000 to 60,000MW, not 5,000,” Dangote said.

He argued that what was achieved with the Dangote Refinery could be replicated in the power sector — if the right investments are made.

“The government has already privatized the sector. Now it’s up to us in the private sector to step in and make things work,” he added.