Abuja, Ikeja, Eko Discos Top as FG Incurs N1.92tn Subsidy Bill in One Year

Emmanuel Addeh in Abuja

The federal government incurred a gross electricity subsidy obligation of N1.928 trillion throughout 2025 to bridge the wide gap between cost-reflective energy tariffs and allowed end-user billing rates across the country, with Abuja, Ikeja, and Eko Electricity Distribution Companies (Discos) emerging as the top receivers of the financial intervention.

Data released by the Nigerian Electricity Regulatory Commission (NERC) in its 2025 Annual Report revealed that the huge spending persisted as a result of a subsisting policy directive by the federal government freezing customer tariffs at the approved rates, except those in band ‘A’.

A THISDAY analysis of the gross subsidy drawdowns across the distribution utilities showed that Abuja Disco accounted for the single highest absolute subsidy requirement in 2025, recording N278.37 billion in government shortfall funding.

In the same vein, Ikeja Disco followed closely with an accrued gross subsidy of N267.37 billion, while Eko recorded N231.91 billion. Together, these three major utilities absorbed N777.65 billion, representing over 40 per cent of the total subsidy burden incurred by the federal government within the 12-month period.

A review of the data indicated that the high cumulative subsidy drawdowns in Abuja, Ikeja, and Eko franchise areas reflected their massive customer density, high commercial energy consumption, and large volume of grid power off-taken compared to other regional distribution companies.

Among the remaining distribution companies, Ibadan Disco recorded a gross subsidy requirement of N239.94 billion, Benin Disco accumulated N178.74 billion, while Enugu Disco accounted for N166.42 billion.

Besides, Port Harcourt Disco recorded N148.36 billion as the federal government’s subsidy obligation, Kaduna Disco accounted for N122.70 billion, Kano Disco required N118.52 billion, Jos Disco recorded N102.58 billion, and Yola DisCo posted N73.40 billion.

A quarter-on-quarter breakdown of the overall national subsidy commitment indicated a steady decline over the course of the year. The federal government incurred N536.40 billion in the first quarter of 2025, N514.36 billion in the second quarter, N458.76 billion in the third quarter, and N418.79 billion in the fourth quarter.

The regulator attributed the quarterly reduction in federal subsidy exposure to operational adjustments within the power distribution network rather than end-user tariff increases. Specifically, the decline was propelled by a combination of reduced total energy off-take by Discos relative to previous quarters and an intentional increase in the share of grid electricity allocated to Band A customers from 40 per cent to 45 per cent by the fourth quarter of 2025.

The higher energy allocation to Band A consumers therefore undersold non-cost-reflective bands and underscored a strategic regulatory focus on enhancing the quality and commercial viability of supply to high-yield industrial, commercial, and residential consumers.

According to the NERC data, comparative international tariff data also demonstrated that Nigeria maintained the lowest end-user electricity tariffs among surveyed African countries throughout 2025.

Across the full year, the average allowed customer electricity tariff in Nigeria stood at N124.30 per kilowatt-hour, equivalent to $0.08 per kilowatt-hour based on a prevailing exchange rate of N1,475 to $1. This rate represented just 42.11 per cent of the regional average of $0.19 per kilowatt-hour recorded across other selected African nations.

NERC stated that electricity consumers in South Africa paid the highest average tariff among the surveyed countries at $0.27 per kilowatt-hour, equivalent to N399.73 per kilowatt-hour, followed by Sierra Leone at $0.25 per kilowatt-hour or N373.18 per kilowatt-hour, Mali at $0.23 per kilowatt-hour or N342.20 per kilowatt-hour, and Burkina Faso, Kenya, Gabon, and Togo at $0.22 per kilowatt-hour or above N320 per kilowatt-hour each.

Furthermore, according to the NERC report, consumers in Senegal paid $0.19 per kilowatt-hour, equivalent to N286.15 per kilowatt-hour, while Ghana and Rwanda recorded $0.18 per kilowatt-hour or over N258 per kilowatt-hour each. 

Similarly, Uganda registered $0.16 per kilowatt-hour or N238.95 per kilowatt-hour, Namibia recorded $0.15 per kilowatt-hour or N227.15 per kilowatt-hour, Ivory Coast stood at $0.14 per kilowatt-hour or N207.98 per kilowatt-hour, and Mauritius recorded $0.13 per kilowatt-hour or N191.75 per kilowatt-hour.

To maintain market liquidity and protect distribution balance sheets from being encumbered by uncollected subsidy debts, the commission stated that it maintained the Disco Remittance Obligation (DRO) framework introduced in January 2024 to replace the former Minimum Remittance Obligation (MRO) framework.

Under the Disco remittance obligation arrangement, the tariff subsidy is deducted at source from the generation invoices billed to distribution companies by the Nigerian Bulk Electricity Trading Plc (NBET) based on what allowed customer tariffs can cover. Distribution companies are subsequently expected and mandated to pay 100 per cent of their calculated remittance obligations.

For non-Maximum Demand customers across all the distribution companies, the national average DRO stood at 39 per cent in 2025. This indicated that allowed end-user tariffs covered less than two-fifths of the generation cost, leaving the federal government to absorb an average tariff subsidy of N69.63 per kilowatt-hour nationwide against an average allowed tariff of N124.30 per kilowatt-hour.

The NERC report also detailed severe operational divergences and cost dynamics across individual distribution utilities operating under different regional environments.

For instance, Yola Disco recorded the highest cost-reflective tariff and unit subsidy requirement in the country, driven by elevated operational expenses, difficult geographic terrain, and severe security challenges including widespread infrastructure vandalism within its franchise territory. 

As a result of identical allowed tariffs across utilities, Yola Disco enjoyed the highest subsidy cost per unit of energy delivered at N149.87 per kilowatt-hour, which is approximately double the average subsidy per kilowatt-hour of other distribution companies. 

Consequently, Yola Disco posted the lowest average remittance obligation in the country at 13 per cent, requiring the federal government to fund the remaining 87 per cent of its energy billing.

Conversely, Ikeja Electric recorded the lowest cost-reflective tariff and the lowest subsidy allocation per unit of energy delivered at N59.11 per kilowatt-hour, achieving the highest average remittance obligation nationwide at 45 per cent,  due mainly to its dense urban customer base and operational efficiency.

Also, Eko Disco posted an average remittance obligation of 46 per cent with a unit subsidy of N70.74 per kilowatt-hour, while Abuja Disco recorded a remittance obligation of 43 per cent with a unit subsidy of N64.98 per kilowatt-hour. 

Benin Disco recorded a 40 per cent remittance obligation, Enugu Disco stood at 38 per cent, Ibadan Disco recorded 37 per cent, Jos Disco posted 36 per cent, Port Harcourt Disco recorded 35 per cent, Kano Disco registered 34 per cent, and Kaduna Disco recorded 30 per cent.