• NESI records 37% distribution losses

Nigerian electricity consumers paid among the lowest tariffs in Africa in 2025, but the apparent affordability came at a huge fiscal cost to the Federal Government, which incurred a N1.928 trillion subsidy obligation to bridge the gap between what customers paid and the cost of supplying electricity.

The disclosure, contained in the 2025 Annual Report and Accounts of the Nigerian Electricity Regulatory Commission (NERC), exposes a striking contradiction in Nigeria’s power sector: consumers enjoyed comparatively cheap electricity, yet the country continued to grapple with low generation availability, inadequate metering, high distribution losses and weak market collections.

According to NERC, the average allowed tariff for Nigerian end-use customers was $0.08 per kilowatt-hour (kWh), equivalent to about N124.30/kWh, during 2025. That was only 42.11 per cent of the $0.19/kWh average recorded across the African comparator countries surveyed.

The Nigerian tariff was significantly below those of virtually all the countries in the comparison.

South Africa recorded the highest average tariff at $0.27/kWh, or about N399.73/kWh, followed by Sierra Leone at $0.25/kWh (N373.18) and Mali at $0.23/kWh (N342.20).

Burkina Faso, Kenya, Gabon and Togo each recorded $0.22/kWh, while Senegal stood at $0.19/kWh. Ghana and Rwanda each charged $0.18/kWh, Uganda $0.16/kWh and Namibia $0.15/kWh.

Even Ivory Coast, at $0.14/kWh, and Mauritius, at $0.13/kWh, recorded higher average tariffs than Nigeria.

The implication is that Nigeria’s electricity consumers were shielded from a substantial portion of the true cost of electricity through government intervention.

NERC explained that the subsidy represents the amount the Federal Government is required to fund whenever approved customer tariffs remain below the commission’s calculated cost-reflective tariff. For 2025, that funding obligation rose to N1,928.31 billion.

But the enormous subsidy bill did not translate into a fundamentally efficient electricity supply system.

The NERC report showed that the sector continued to operate with substantial unused generation capacity. Average available generation capacity from grid-connected power plants stood at 5,398.33 megawatts (MW) during the year, while the availability factor was only 39.62 per cent.

That means more than 60 per cent of potential generation capacity was unavailable on average, underscoring the persistent gap between Nigeria’s installed generation assets and the electricity actually available to consumers.

Total electricity generation during 2025 stood at 39,208.68 gigawatt-hours (GWh), with hydropower accounting for 12,804.18GWh, representing 32.66 per cent of total generation.

The weakness extended beyond generation to the distribution end of the electricity value chain.

As of December 31, 2025, only 6,966,584 of the 12,163,412 registered electricity customers had meters, representing a metering rate of just 57.27 per cent.

This was despite the installation of 972,040 new meters by Distribution Companies (DisCos) during the year under various financing schemes.

The metering deficit remains significant because the absence of meters complicates accurate energy accounting, billing and revenue collection while contributing to disputes between consumers and DisCos.

The distribution companies received 31,251.77GWh at their trading points but billed customers for only 25,867.86GWh, producing an energy accounting efficiency of 82.77 per cent.

The performance varied considerably across DisCos. Ibadan DisCo recorded the highest energy accounting efficiency at 88.84 per cent, while Enugu DisCo recorded the lowest at 72.18 per cent.

The financial picture was similarly weak as DisCos were billed N2,988.30 billion worth of electricity out of N3,683.10 billion supplied, representing a gross billing efficiency of 81.14 per cent.

Of the amount billed, however, only N2,318.81 billion was collected, giving the sector a collection rate of 77.60 per cent.

The combined Aggregate Technical, Commercial and Collection (ATC&C) loss across the distribution companies consequently climbed to 37.03 per cent, almost twice the sector’s 20.54 per cent regulatory target for 2025.

In other words, more than a third of the electricity supplied through the distribution system was effectively lost through a combination of technical losses, commercial losses and poor collection.

The weakness in revenue collection also affected payments into the electricity market. The DisCos remitted a combined N1,632.04 billion to the Nigerian Bulk Electricity Trading Plc (NBET) and the Market Operator against an invoice of N1,721.624 billion. This translated into a 94.80 per cent remittance rate and left an N89.58 billion market shortfall.

The performance was, however, uneven across the distribution companies. Eko, Ikeja and Port Harcourt DisCos achieved 100 per cent remittance to NBET, demonstrating that some operators were capable of meeting their market obligations.

At the opposite end, Kaduna DisCo recorded only 40.13 per cent remittance to NBET. It also recorded the lowest remittance to the Market Operator, at 48.11 per cent.

The figures collectively present a paradox at the heart of Nigeria’s electricity reform: the country has some of Africa’s cheapest electricity tariffs, but the low prices are sustained by a massive public subsidy while the electricity supply chain continues to leak value at virtually every stage.

Consumers therefore receive electricity at a price far below the regional benchmark, but the difference is not eliminated; it is transferred to the public balance sheet.

At the same time, the sector is losing substantial volumes of electricity through technical and commercial inefficiencies, collecting less than four-fifths of its billed revenue and operating with a generation fleet whose availability remains below 40 per cent.

The NERC figures suggest that Nigeria’s electricity crisis is therefore not simply a question of how much consumers pay for power, but also how efficiently the electricity market converts generation capacity and public expenditure into reliable electricity and sustainable revenues.

The N1.93 trillion subsidy obligation, when viewed alongside the 37.03 per cent ATC&C losses, the 57.27 per cent metering rate, the 39.62 per cent generation availability factor and the 77.60 per cent collection rate, points to a sector in which low consumer tariffs have yet to be matched by structural efficiency.

The central policy challenge for Nigeria is consequently becoming increasingly difficult to ignore: how to move toward cost-reflective electricity pricing without transferring the burden of inefficiency and underinvestment entirely to consumers, while simultaneously eliminating the operational losses that make the sector fiscally unsustainable.