FG Pays Less Than 1% as Nigeria’s Power Subsidy Surges to ₦1.95tn

Nigeria’s electricity subsidy has witnessed a staggering surge, jumping by over 219% within one year, rising from ₦610.06 billion in 2023 to an estimated ₦1.95 trillion in 2024.

This sharp escalation highlights growing fiscal pressure on the Federal Government and the mounting cost of sustaining power subsidies amid broader economic reforms.

Despite the enormous financial obligation, the Federal Government has only disbursed ₦371.34 million so far in 2024 representing just 0.019% of the total subsidy required for the year.

The data paints a bleak picture of the government’s ability to meet its subsidy commitments and raises serious concerns about the financial health and viability of the power sector.

Subsidies in Nigeria’s electricity market are primarily aimed at bridging the gap between cost-reflective tariffs and the rates paid by millions of consumers, especially those in the lower tariff bands (D and E), who are considered the most vulnerable.

With inflation at record highs and income levels stagnating, the government has opted to maintain some level of price cushioning to prevent further hardship. However, this policy now comes at a heavy cost.

Industry analysts warn that the huge shortfall in subsidy payments could have serious implications. Power distribution companies (DisCos) and generation companies (GenCos) may experience deepening liquidity crises, leading to weaker electricity supply, delayed infrastructure investment, and potential threats to ongoing sector reforms.

The widening gap between market costs and government payments also underscores the broader challenge of transitioning Nigeria’s power sector to full cost-reflectivity a goal outlined in the country’s Power Sector Recovery Programme (PSRP) and various international financing agreements.

As the government struggles with fiscal constraints and competing budgetary demands, questions are being raised about the long-term sustainability of the subsidy model. Some stakeholders are calling for a gradual but transparent review of the pricing structure, improved metering, and targeted subsidies for only the most vulnerable.

With over ₦1.94 trillion yet to be paid, the fate of Nigeria’s power sector now hangs in the balance a sector critical to economic growth, industrial productivity, and millions of households across the country.