The Federal Government’s debt to electricity generation companies has climbed to ₦1.05 trillion in the first half of 2025.

This amount represents unpaid power subsidy obligations for the first and second quarters of the year.

According to the Nigerian Electricity Regulatory Commission’s Second Quarter Report for 2025, the government accumulated ₦514.35 billion in subsidy obligations in Q2, after ₦536.40 billion in Q1, bringing the total to over ₦1.05 trillion within six months.

This development comes as the Federal Government has reportedly approved a ₦4 trillion package to settle longstanding debts owed to power generation companies.

NERC attributed the growing debt to the continued lack of cost-reflective tariffs, which compels the government to cover the gap between the actual cost of power generation and the amount consumers are billed.

“In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff subsidies,” the report stated.

NERC further explained that, for administrative convenience, the subsidy is applied only to the generation cost owed by DisCos to the Nigerian Bulk Electricity Trading Plc at source, through what it described as a “DisCo’s Remittance Obligation.”

The commission stated that the DisCo Remittance Obligation framework, which replaced the Minimum Remittance Obligation system in January 2024, was designed to prevent unpaid tariff subsidies from burdening the balance sheets of distribution companies, thereby enabling them to secure funding for critical network investments.

Under this arrangement, NERC explained, NBET bills the Federal Ministry of Finance for the portion of GenCo costs not covered by the DRO—representing the tariff subsidy—for prompt settlement.

The report revealed that the government’s subsidy obligation stood at ₦514.35 billion in the second quarter of 2025, marking a 4.11 percent decline from ₦536.40 billion in the first quarter. This reduction, NERC noted, was mainly due to a 4.22 percent drop in energy offtake by the distribution companies.

“Due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N514.35bn,” the report said.

The report added that although the government’s subsidy obligation declined by ₦22.04 billion in nominal terms, it still represented 59.60 percent of the total GenCo invoice—an increase of 0.44 percentage points compared to the first quarter of 2025.