The Federal Government recorded a drop in its electricity subsidy payment in the first quarter of 2026 amid persistent blackouts.
A report released by the Nigerian Electricity Regulatory Commission (NERC) shows that the Federal Government incurred a total electricity subsidy obligation of ₦358.32 billion in the first quarter (Q1) of 2026, down from ₦418.79 billion in Q4 2025.
This represents a 14.44% decline (a reduction of ₦60.46 billion) in government fiscal intervention.
The amount incurred as electricity subsidy represents approximately 51.95% of the total generation costs (GenCo invoices) for the period.
A monthly breakdown of the subsidy obligation during the quarter shows that ₦126.48 billion was incurred in January, ₦116.34 billion in February, and ₦115.50 billion in March.
The subsidy obligation arises from the absence of cost-reflective tariffs, as the government continues to freeze end-use customer tariffs at the rates payable in July 2024. The subsidy covers the gap between these allowed tariffs and the actual cost-reflective rates.
The NERC’s report indicated that the drop in the subsidy bill was not driven by tariff reforms or a shift toward cost-reflective pricing, but caused by operational shortfalls and a significant drop in available grid power.
It said there was an 8.56% decrease in the energy offtake by Distribution Companies (DisCos) from the grid during the quarter compared to Q4 2025.
“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,” the report noted.
The report showed that average available generation capacity plunged by 17.45%, falling from 5,400.38 MW in Q4 2025 to 4,457.96 MW in Q1 2026. The total generation fell by 9.64% to 8,883.47 GWh.
The reduction in available energy was compounded by two major national grid failures in January 2026—a total collapse on January 23 and a partial collapse on January 27.
Because there was simply less electricity running through the system for DisCos to buy and distribute, the overall gross cost of generation fell, shrinking the total financial gap covered by the government.
Despite the decline, the Federal Government continues to absorb more than half of the commercial burden of the Nigerian Electricity Supply Industry (NESI) due to frozen end-user tariffs (which remain tied to July 2024 rates).
According to the report, the total GenCo invoices are ₦689.72 billion. However, DisCos were only invoiced for their portion of the generation costs, known as the DisCo’s Remittance Obligation (DRO), which totaled ₦331.40 billion for the quarter. The remaining portion of the generation costs (the tariff subsidy – ₦358.32 billion) was invoiced directly by the Nigeria Bulk Electricity Trading (NBET) PLC to the Federal Ministry of Finance for settlement.
Value Chain Challenges Persistent
While upstream fiscal numbers dropped, downstream commercial performance remained highly challenged.
DisCos recorded significant commercial losses in both billing and collection categories. They recorded a cumulative billing loss of ₦198.25 billion. This loss represents the difference between the naira value of the energy received (₦955.19 billion) and the amount actually billed to customers (₦756.93 billion), resulting in a billing efficiency of 79.24%.
The DisCos failed to collect ₦159.37 billion of the amount billed to customers during the quarter. Out of the ₦756.93 billion billed, only ₦597.56 billion was collected, translating to a collection efficiency of 78.95%.
ATC&C Losses
The total combined loss, known as the Aggregate Technical, Commercial and Collection (ATC&C) loss, was recorded at 37.44% for the quarter. This consists of Technical and Commercial Loss (Billing) 20.76% and Collection Loss 21.05%.
This overall performance level was 20.52 percentage points higher than the allowable target of 16.92% set in the Multi-Year Tariff Order (MYTO). This underperformance translated to a cumulative revenue loss of ₦140.64 billion across all DisCos during the period.
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All eleven DisCos failed to meet their individual ATC&C loss targets during the quarter, with Kaduna DisCo recording the highest level of underperformance (an actual loss of 69.66% against a target of 18.18%). In contrast, Ikeja DisCo recorded the highest collection efficiency at 90.00%, while Eko DisCo achieved the highest billing efficiency at 88.98%.
On a positive note, the downstream segment of the electricity sector saw a boost in metering end-use customers, with new meter installations hitting a five-quarter high of 357,495 meters in Q1 2026.
The Nigerian Electricity Supply Industry (NESI) recorded a total of 7,324,097 metered customers out of 12,386,848 active registered customers, resulting in an overall metering rate of 59.13% as of March 31, 2026.
The new figure represents a 10.38% increase compared to the 323,864 installations recorded in the fourth quarter of 2025.
Benin DisCo (72,738) and Abuja DisCo (50,330) recorded the highest number of installations, accounting for 20.35% and 14.08% of the total quarterly installations, respectively. Kaduna DisCo saw the most significant growth in deployment, with a 119.53% increase relative to the previous quarter. Conversely, Kano, Enugu, and Abuja DisCos recorded declines in their installation volumes during this period.
Victor Ezeja is a Nigerian journalist skilled in producing insightful news analyses, feature stories, and interviews that simplify complex issues and drive informed public discourse. His work combines rigorous research, balanced reporting, and compelling storytelling to highlight developments shaping industries and society. Victor, who holds a Master's Degree in Mass Communication, specializes in energy, aviation, business, and economic reporting. He can be reached via @VICTOREZEJA on X