FG Incur N358bn Electricity Subsidy in Q1 as Distribution Companies Collect 78.95% of Billed Amounts

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The Federal Government incurred a staggering N358.32 billion electricity subsidy in the first quarter of 2026, according to the Nigerian Electricity Regulatory Commission (NERC). This subsidy is the difference between the actual cost of electricity generation and the approved tariffs paid by consumers.

Obas Esiedesa is the person who reported on this. He is a journalist for Vanguard News. Obas is not a person directly involved with the subsidy or tariff discussions. He is a regular reporter of various news stories.

The Commission stated that in the absence of cost-reflective tariffs, the FG covers the difference through tariff subsidies. The Distribution Companies' Remittance Obligation (DRO) framework applies the subsidy to the generation costs payable by DisCos to the Nigerian Bulk Electricity Trading Plc.

Under the DRO framework, the subsidy is applied to the generation costs payable by DisCos to the Nigerian Bulk Electricity Trading Plc. The government directly settles the outstanding portion with the Federal Ministry of Finance. According to the report, electricity generation companies invoiced a total of N689.72 billion for energy supplied to the 11 DisCos during the quarter.

Only N331.40 billion was billed to the DisCos under the DRO arrangement, leaving the Federal Government to shoulder the remaining N358.32 billion. This represents a massive 51.95% of the total generation invoice during the quarter. The NERC highlighted that the key driver of this reduction in FGN subsidy obligation is the decrease in energy offtake of the DisCos by 8.56% between 2025/Q4 and 2026/Q1.

So, what does this mean for Nigerians? The high electricity subsidy reflects the gap between cost-reflective tariffs and approved rates. This gap is a symptom of the underlying issues in the electricity sector, including inadequate investment, inefficiencies in the distribution network, and inadequate regulatory oversight.

The NERC report also showed that electricity distribution companies collected N597.56 billion out of the N756.93 billion billed to customers during the quarter, translating to a collection efficiency of 78.95%. This indicates that only about 21.05% of total billed amounts were not collected. The high non-collection rate is a major concern for the sector.