Electricity Subsidy Skyrockets 220% to ₦1.94tn in 2024 Amid Mounting Debts, Naira Devaluation
The Federal Government’s electricity subsidy bill surged by a staggering 219.67% from ₦610.06 billion in 2023 to an unsustainable ₦1.94 trillion in 2024, despite implementing a cost-reflective tariff hike for Band A consumers in April.
This was revealed in the 2024 annual report of the Nigerian Electricity Regulatory Commission (NERC), which attributed the ballooning subsidy burden to worsening macroeconomic pressures—especially the naira devaluation following its floatation by President Bola Ahmed Tinubu and the concurrent removal of fuel subsidies.
Despite the increase in subsidy obligations, the Federal Government was only able to disburse a paltry ₦371.34 million in 2024—just 0.019% of the total, leaving nearly ₦1.94 trillion in unpaid liabilities. These subsidies were meant to bridge the gap between cost-reflective tariffs (averaging ₦175.31/kWh) and the actual allowed tariffs (₦100.27/kWh), creating a ₦75.04/kWh deficit per unit of electricity consumed nationwide.
Breakdown of Subsidy by Quarter and Region
According to NERC, the subsidy obligation in Q1 2024 reached ₦633.30 billion—a 303% increase from the 2023 quarterly average of ₦157.15 billion and a 1,699% spike compared to 2022 levels. Although the Band A tariff adjustment temporarily eased the burden by 39.99% in Q2, subsequent directives by the Federal Government to freeze all customer tariffs at July rates reignited the pressure, pushing the Q3 obligation to ₦464.12 billion and Q4 to ₦471.69 billion.
In total, Abuja, Ikeja, and Ibadan DisCos accounted for the largest subsidy allocations at ₦285bn, ₦272bn, and ₦236bn respectively. Yola DisCo attracted the highest subsidy per unit, driven by a cost-reflective tariff of ₦266.64/kWh—far above the national average—due to high operational costs, insecurity, and infrastructure vandalism.
New Payment Framework, Old Challenges
To address systemic distortions, NERC replaced the Minimum Remittance Obligation with the DisCo Remittance Obligation (DRO) model in January 2024. Under this framework, DisCos are expected to pay 100% of the tariffs they are allowed to charge customers, while the government pays the balance (subsidy) directly to the Nigerian Bulk Electricity Trading Plc (NBET) for onward transfer to the Generation Companies (GenCos).
However, the government’s failure to fund the subsidy has left GenCos with unpaid bills nearing ₦5 trillion, raising fears of a collapse in generation capacity and plunging the sector into deeper crisis.
Expert Reaction: “Power Sector Could Remain Broken for 20-30 Years”
Bode Fadipe, a veteran in the energy sector, blamed the explosion in subsidy costs on the naira’s depreciation, saying almost every material required for power generation is imported and dollar-denominated—including gas.
He warned that the sector is structurally flawed and may not recover for “another 20 to 30 years” without urgent reforms. “If the ₦1.94tn is separate from the ₦4tn owed to GenCos, we’re talking about a ₦6tn crisis. That’s more than the annual budget of most African countries,” he said.
Fadipe also cautioned against blanket removal of electricity subsidies, citing a lack of clarity around actual electricity costs and the likelihood of increased energy theft by consumers unable to pay higher tariffs. “The truth is that tariff hikes alone won’t fix the sector. We need a holistic overhaul, not another stopgap,” he stressed.
Dangote Urges Private Sector Intervention
Meanwhile, Africa’s richest man, Alhaji Aliko Dangote, called on wealthy Nigerians to invest in the power sector, asserting that with the Dangote Group generating over 1,500MW for internal use, Nigeria should not be struggling to produce just 5,000MW nationally.
“There’s no reason why Nigeria shouldn’t be generating 50,000 to 60,000MW. What we’ve done with the refinery proves that large-scale industrial projects are possible in this country,” Dangote said.
He emphasized that the power sector had already been privatized, and encouraged Nigerian investors to stop moving capital abroad and instead contribute to national development.
Summary Figures:
Year FG Electricity Subsidy % Increase FG Payment Fulfilled
2022 ₦140.84bn (average annual) – Unknown
2023 ₦610.06bn +333% Partial
2024 ₦1.94tn +219.67% ₦371.34m (0.019%)
Nigeria’s electricity sector faces a perfect storm of inflation, naira devaluation, frozen tariffs, and unpaid subsidies. Without sweeping reforms, fiscal discipline, and deeper private sector involvement, the country’s dream of a stable, sustainable energy future remains elusive.
