Nigeria’s electricity subsidy jumps 220% to N1.94tn in 2024 as naira devaluation and frozen tariffs pressure the power sector and public finances

Nigeria’s electricity subsidy bill surged to ₦1.94 trillion in 2024, marking a 219.67% increase from the ₦610 billion recorded in 2023, according to a new report by the Nigerian Electricity Regulatory Commission (NERC).

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The spike comes amid the federal government’s continued freeze on end-user electricity tariffs despite sharp rises in cost-reflective tariffs, worsened by the floating of the naira and high inflation following the removal of fuel subsidies.

NERC revealed in its 2024 annual report that the government had paid only ₦371.34 million—just 0.019% of the total electricity subsidy obligation—raising concerns about growing debts in the already fragile power sector.

The report attributed the dramatic increase to the disparity between allowed tariffs and actual generation and supply costs, with the government covering the gap as part of its tariff shortfall funding strategy.

“Due to the absence of cost-reflective tariffs across all DisCos in 2024, the government incurred a subsidy obligation of ₦1.94tn, translating to an average of ₦161.85bn monthly,” NERC stated.

According to the commission, the floating of the naira in June 2024 significantly impacted subsidy figures, as many components of power infrastructure and gas supply contracts are dollar-denominated.

Energy expert Bode Fadipe explained that nearly all equipment used in the generation and distribution of electricity is imported, making the sector highly vulnerable to foreign exchange volatility.

“The moment the naira weakened, the cost of producing electricity rose, but the government kept tariffs static. That gap widened the subsidy bill,” Fadipe said.

He warned that unless structural reforms are implemented, the power sector may not overcome its challenges for another 20 to 30 years, pointing out that the government currently owes as much as ₦4tn to generation companies (GenCos).

In its regional analysis, NERC noted that Abuja DisCo attracted the highest subsidy share at ₦285bn, followed by Ikeja (₦272bn) and Ibadan (₦236bn).

Yola DisCo, despite delivering less energy, received the highest subsidy per kilowatt-hour due to elevated operational costs and security challenges.

While Band A customers—who consume 40% of energy—had their tariffs adjusted to cost-reflective levels in April, the government froze all other tariffs at July levels, resulting in a renewed spike in subsidy obligations in Q3 and Q4.

• Q1 2024: ₦633.30bn
• Q2 2024: ₦380.06bn (↓ 39.99%)
• Q3 2024: ₦464.12bn
• Q4 2024: ₦471.69bn

The subsidy per kilowatt-hour stood at ₦75.04, with the average cost-reflective tariff at ₦175.31/kWh, while consumers paid an average of ₦100.27/kWh.

Despite the huge obligations, the federal government has failed to honour payments to the Nigerian Bulk Electricity Trading Plc (NBET), the intermediary between DisCos and GenCos. NBET invoices the Ministry of Finance, which then pays GenCos the subsidy portion.

Power Minister Adebayo Adelabu has repeatedly admitted that the government lacks the fiscal space to continue this arrangement, urging consumers to prepare for a cost-reflective tariff regime.

Fadipe cautioned against immediate and total removal of power subsidies without a proper cost structure and strategy to prevent energy theft and public backlash.

“We still don’t know the true cost of electricity. If subsidies are removed abruptly, theft will increase because people won’t afford the new rates,” he said.

He also noted that tariff adjustments alone won’t fix the sector’s fundamental issues. “A holistic reform is needed—not just higher prices,” he added.

Meanwhile, Africa’s richest man, Aliko Dangote, has urged Nigerian investors to channel capital into the power sector, noting that the Dangote Group alone generates 1,500MW for its internal use.

“Nigeria should be producing at least 60,000MW, not just 5,000MW. What we’ve done with our refinery shows it’s possible,” Dangote said.

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He called on local investors to stop exporting capital and instead support energy infrastructure development in Nigeria.