Precious Anga
Lagos — The Federal Government spent ₦358.32 billion on electricity subsidies in the first quarter of 2026 despite continued power outages and operational challenges across Nigeria’s electricity sector, according to the latest report by the Nigerian Electricity Regulatory Commission (NERC).
The subsidy, which averaged more than ₦119 billion monthly, was incurred after the government retained end-user electricity tariffs at the July 2024 rates instead of allowing cost-reflective pricing.
NERC’s First Quarter 2026 Report showed that the tariff shortfall stood at ₦126.48 billion in January, ₦116.34 billion in February and ₦115.50 billion in March, bringing the total subsidy for the three-month period to ₦358.32 billion.
According to the commission, the subsidy represented a 14.44 per cent decline from the ₦418.79 billion recorded in the fourth quarter of 2025. However, the Federal Government still covered 51.95 per cent of the total invoices issued by electricity generation companies (GenCos).
“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of ₦358.32bn; this represents a ₦60.46bn (-14.44 per cent) reduction in FGN subsidies compared to 2025/Q4 (₦418.79bn),” the report stated.
It added, “The government subsidy accounted for 51.95 per cent of the total GenCo invoice… The key driver of this reduction in FGN subsidy obligation is the decrease in energy offtake of the DisCos by 8.56 per cent between 2025/Q4 and 2026/Q1.”
NERC explained that the lower subsidy bill was not the result of tariff reforms but rather a decline in electricity purchased by distribution companies (DisCos) during the quarter.
The commission disclosed that electricity generated during the period attracted invoices worth ₦689.72 billion. However, because electricity tariffs remained frozen, the Nigerian Bulk Electricity Trading Plc (NBET) billed the DisCos only ₦331.40 billion, while the Federal Government assumed responsibility for the remaining ₦358.32 billion.
“The NBET invoice payable by the DisCos for 2026/Q1 was only ₦331.40bn because the FGN has taken responsibility for approximately 52 per cent (₦358.32bn) of the total generation costs in the form of subsidies arising from the freezing of end-use customer tariffs at the rates payable in July 2024,” the report stated.
NERC further explained that under the current market arrangement, subsidies are deducted at source through the DisCos’ remittance obligations, while the outstanding balance is invoiced directly to the Federal Ministry of Finance for settlement.
“In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff subsidies,” the commission said.
It warned that the existing subsidy regime exposes the Federal Government to unpredictable financial liabilities as electricity demand and generation costs fluctuate.
“The open-ended nature of the subsidy exposes the FGN to indeterminate subsidy obligations due to volumetric risk and changes in generation costs arising from changes in the generation mix, particularly with an increase in thermal generation,” NERC stated.
Despite the huge public spending, electricity supply weakened during the quarter. Average available generation capacity fell by 17.45 per cent, dropping from 5,400.38 megawatts (MW) in the fourth quarter of 2025 to 4,457.96MW in the first quarter of 2026.
Similarly, total electricity generation declined by 9.64 per cent to 8,883.47 gigawatt-hours (GWh), while average hourly generation dropped by 7.64 per cent to 4,112.72 megawatt-hours per hour (MWh/h).
The commission also reported two major disturbances on the national grid during the review period, both of which resulted in widespread power outages.
“There were two incidents of system disturbance on the National Grid in 2026/Q1. A total collapse occurred on 23 January 2026, and a partial collapse of the grid occurred on 27 January 2026,” the report said.
According to NERC, the nationwide collapse was caused by the separation of the busbar at the Sapele Transmission Station, while preliminary investigations indicated that the partial collapse resulted from inadequate reactive power support needed to maintain grid voltage stability.
