Nigeria’s power sector recorded a total revenue shortfall of ₦3.39 trillion in 2025, with tariff subsidies and commercial losses recorded by distribution companies (DisCos) accounting for a substantial share of the sector’s shortfalls.
This massive deficit was dominated by Federal Government tariff subsidies and downstream retail losses (billing and collection inefficiencies), which collectively accounted for 97.2% of the sector’s total financial leakage, while upstream utility remittance defaults represented a minor fraction of the gap.
The Nigerian Electricity Regulatory Commission (NERC) disclosed this in its 2025 annual report, highlighting the sector’s persistent liquidity crisis.
The NERC annual report details how operational inefficiencies and frozen end-user tariffs combined to drive this deficit.
Pinnacle Daily’s analysis of the report shows that out of the ₦3.39 trillion total revenue shortfall, ₦1.93 trillion was a gross electricity tariff subsidy obligation incurred by the Federal Government. Though this represents a drop of ₦13.47 billion when compared with ₦1.941 trillion in tariff subsidies incurred in 2024, it reflects the widening gap between the cost of supplying electricity and the tariffs paid by consumers. The subsidy obligation represented about 57.44 per cent of invoices issued by the Nigerian Bulk Electricity Trading Company (NBET).
The figure highlights the persistent financial strain confronting the power sector despite successive tariff reforms designed to move electricity prices closer to cost-reflective levels.
The subsidy obligation averaged about ₦160.69 billion monthly during the year, although the burden declined progressively from ₦536.40 billion in the first quarter to ₦418.79 billion in the fourth quarter. The decline, however, did not necessarily indicate a fundamental resolution of the sector’s financial problems. The regulator attributed part of the reduction to lower electricity offtake by DisCos and a growing share of electricity supplied to higher-paying Band A customers from 40% to 45%.
The continued subsidy burden comes despite the Federal Government’s tariff reforms, including the April 2024 increase for Band A customers from ₦66 to ₦225 per kilowatt-hour, and subsequently to about ₦270 per kilowatt-hour. The adjustment was aimed at reducing subsidy costs by requiring customers receiving at least 20 hours of supply daily to pay tariffs closer to the cost of service. Yet, the wider market remained dependent on government intervention because cost-reflective tariffs have not been implemented across all customer categories.
Retail Commercial and Collection Losses Drain ₦1.368 Trillion
The data also point to persistent retail losses, weak revenue collection, incomplete metering and other distribution-sector inefficiencies as major factors undermining the financial sustainability of the electricity market.
Electricity distribution companies in the downstream subsector suffered severe leakages at the retail level.
A combination of unbilled power and uncollected electricity bills across the 11 DisCos in the country led to ₦1.368 trillion in losses.
According to the NERC report, a total of ₦3.68 trillion worth of energy was generated and delivered to DisCos in 2025, but customers were billed for only ₦2.99 trillion, resulting in a gross billing efficiency of 81.14%. This reflects an unbilled gap of ₦694.8 billion (commercial losses).
The report further indicated that out of the ₦2.99 trillion billed to electricity customers, only ₦2.32 trillion was recovered, marking a collection efficiency of 77.60%. This shows a collection shortfall of ₦669.5 billion (revenue Deficit). This means that for every ₦100.00 billed, approximately ₦22.40 was never collected.
These shortfalls have been attributed primarily to energy theft, technical losses, inadequate billing systems or poor energy accounting, and customers’ unwillingness or inability to pay electricity bills.
DisCo Remittance Upstream Operators
DisCos’ remittance deficits to upstream operators in 2025 are considered low (2.6% of total shortfall) when compared with the 2024 remittance rate. DisCos were invoiced a total gross DisCo Remittance Obligation (DRO-adjusted) sum of ₦1.72 trillion by NBET and the Market Operator (MO). They remitted ₦1.63 trillion—achieving a strong remittance rate of 94.80% and leaving a shortfall of only ₦89.58 billion. This high performance is largely because the government subsidy absorbed the majority of NBET’s bulk energy invoice, shielding DisCos from direct liability for more than half of the upstream energy costs.
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Market Remittances by Special and Bilateral Customers
In 2025, the Nigerian Electricity Supply Industry (NESI) continued to provide electricity to three international bilateral customers: i) Societe Beninoise d’Energie Electrique; ii) Compagnie Energie Electrique du Togo; iii) Societe Nigerienne d’electricite.
Cumulatively, these 3 customers received an invoice of $73.91 million from MO and made a payment of $62.75 million. This corresponds to a remittance performance of 84.90%. However, this was a significant improvement from a 75.01% remittance rate in 2024 ($14.01 million shortfall on $56.07 million invoiced). The domestic bilateral customers received a total invoice of ₦13.20 billion from the market operator and made a payment of ₦12.75 billion, corresponding to a remittance performance of 96.60%.
The report also shows that 100% billing defaults persist from Special Local Complexes (0.2% of total shortfall). The Ajaokuta Steel Complex and its host community recorded a 0.00% remittance rate, defaulting entirely on its NBET energy invoice (₦4.97 billion) and MO service invoice (₦501.45 million) for a total debt shortfall of ₦5.47 billion.
Physical Energy Leakages vs Financial Losses
Analysis of the physical flow of electricity in gigawatt-hours (GWh) across the Nigerian electricity supply industry shows that while total power generation and grid delivery expanded in 2025, over 8,490 GWh of generated electricity was lost before end-use customer bills could be successfully collected.
The total grid generation in 2025 was 39,208.68 GWh, reflecting an increase of 2,114.98 GWh (+5.70%) from 37,093.70 GWh recorded in 2024. However, energy received by DisCos was 31,251.77 GWh (7,956.91GWh loss). This was still higher than 29,126.27 GWh recorded in 2024 (+7.30%).
Energy billed to end-users in 2025 was 25,867.86 GWh, meaning that 5,383.91 GWh of energy was unbilled (17.23% of total energy received by the DisCos). This was still lower than 23,919.68 GWh of energy billed to end-users in 2024. However, while the total energy billed to the end-users in 2025 was higher than that of 2024, unbilled energy increased by 3.41% (177.32 GWh) in 2025 from 5,206.59 GWh in 2024.
The average hourly generation rose from 4,222.87 MWh/h to 4,475.88 MWh/h. The Transmission Loss Factor (TLF) increased by 183 GWh from 2,927 GWh in 2024 to 3,110 GWh in 2025.
Sector Implication
The report on the shortfalls shows that the sector’s financial viability remains highly dependent on government subsidies and retail efficiency.
The financial pressure is compounded by distribution losses, which reduce the amount of electricity DisCos can effectively bill and collect for, as seen above.
Upstream operators are heavily dependent on timely subsidy payments by the Federal Government to NBET. At the same time, the retail sector’s combined leakage of ₦1.36 trillion (billing and collection shortfalls) undercuts the financial liquidity of DisCos.
Industry analysts have consistently warned that simply increasing tariffs may not resolve the sector’s liquidity crisis unless accompanied by aggressive action to reduce technical and commercial losses, improve metering and strengthen collection efficiency.
For instance, the NERC report shows that while customer metering deployment accelerated significantly in 2025, with 6,966,584 out of 12,163,412 active registered customers metered, 5,196,828 customers remained unmetered.
The electricity market’s liquidity crisis ultimately affects the entire value chain—from gas suppliers and generating companies to transmission operators and DisCos.
For GenCos and gas suppliers, delayed payments can restrict their ability to maintain facilities and secure the fuel required to generate electricity. This, in turn, limits available generation and feeds back into the revenue problems of DisCos.
Analysts note that under the payment assurance waterfall regime, unless DisCos can eliminate these retail inefficiencies, they will continue to face constrained cash flows, hampering their ability to undertake critical network and capital investments.
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