By Alabi Williams
THE Federal Government has said it is tired of shouldering electricity subsidies alone. It’s time to share the burden with states and local governments, it says. Beginning with the 2026 budget, it has determined that the projected N3.6 trillion subsidy costs will now be deducted from the Federation Account, so that states and councils will own their shares.
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, made the disclosure at a training session for Ministries, Departments and Agencies (MDAs), in Abuja. He said all the tiers of government should identify and fund subsidies for their constituencies; that spreading the cost would promote cost-reflective tariffs and sector stability.
He said: “In 2026, we will stop pretending that this bill (subsidies) can be left to the Federal Government alone. When tariffs are held below cost, a gap is created. That gap is a subsidy, and a subsidy is a bill.”
Many consumers doubt the authenticity of the so-called electricity subsidy. They believe there are liabilities in the sector that government ought to fix, but is reluctant to do so. In the end, everything is lumped as subsidy and the culprits are always the poorly served consumers.
Government is fixated on tariff as the solution to the sector’s problems. Close the gaps and investors would swamp the industry. Maybe. But aren’t there other sides that the government overlooks?
On paper, there exists a Power Consumer Assistance Fund (PCAF), created by the Electricity Act of 2023, in which vulnerable households are to enjoy some bailout. Not everybody deserves electricity subsidy. That’s the policy of government and their World Bank and IMF advisers.
It is the same ideology that was used to push the petrol subsidy debate; that the poor do not benefit from petrol subsidy. Only rich people do. But the experience of the last three years since subsidy was yanked off has shown that nearly everybody needed petrol subsidy. But the poor need it most.
Rather than the government offering electricitysubsidy across board, the PCAF was proposed to target low-income and vulnerable households that do not earn more than N50,000 monthly with electricity support. Good thinking; but that idea has not materialised.
Domiciled in the Nigerian Electricity Regulatory Commission (NERC), the PCAF was to be funded by electricity distribution companies and others. The idea was originally part of the 2005 Poverty Alleviation Programme (PAP) of the Federal Government, designed to support poor households with a stipend of N5,000 monthly.
But this time, the aims of PCAF are: energy justice for vulnerable people, to reduce liquidity in the industry, by having a segment of wealthy households pay enough cost-reflective tariffs.
What government calculates as electricity subsidy is the gap between cost-reflective tariff -true cost of generating and distributing electricity- and the regulated tariff determined by government. The Nigerian Bulk Electricity Trading (NBET), is designated for settling subsidies.
Government pushes to the background core elements that actually determine the energy market, such as inflation and foreign exchange. There is also the cost of gas, that is priced in dollars. These elements that are clearly within government control determine the price. But when government fails to put the elements under control, it quickly pushes the implications to consumers.
Essentially, government is responsible for the factors that determine tariff fixing, not consumers. If the naira is too weak to withstand foreign exchange pressures, prices of goods and services, including electricity tariffs are affected. If there is illiquidity in the industry, as it is always, government assumes the only solution is to increase tariff.
The dilemma for government is that there are too many poor people who cannot afford the so-called cost-reflective tariffs. The same World Bank says that approximately 141 million Nigerians are expected to live in poverty in 2026. That is about 62 per cent of the population. Who are those left to pay Band A tariffs for the industry to generate enough to attract investors?
Government does not remember to mention that many households and communities subsidise power at different levels. Communities pay huge sums to procure transformers. Where they’re lucky to have one delivered by a benevolent politician, they raise hundreds of thousands to energise it. Communities purchase electricity poles and cables in areas that are ungoverned.
Consumers have been paying for pre-paid meters since the distribution companies came into existence. The only time meters were distributed for free was when PHCN did pilot schemes before it was fragmented and sold. Since then, consumers pay for meters out of pocket, with the agreement that they would be rewarded with energy credits by the DisCos. That never happened.
In search for solutions, government fails to admit its fiscal indiscipline. It has failed to fund NBET. The story is that NBET got just N60million out of N858 billion appropriated for it in 2025. That puts the industry in a perpetual epileptic mode. At the end of the day, the disruptions are calculated as subsidies charged on consumers.
There is also the corruption aspect. Last week, the Socio-Economic and Accountability Project (SERAP), sued the Power Minister, Adebayo Adelabu and the NBET for failure to account for the missing or diverted NBET’s N128 billion. The allegation was documented in the Auditor-General’s report published on September 9, 2025, and is said to contribute significantly to the frequent grid collapse.
So, government has to return to the table to separate genuine subsidies from inefficiencies. Nigerians are already overtasked with cost-of-living challenges.
Energy theft and capacity to pay
It is reported that more than 68 per cent of electricity consumers deliberately by pass pre-paid meters to escape paying for what they consume. The Nigerian Independent System Operator (NISO), a new outfit created by the Electricity Act of 2023, made this known at the conference of Power Correspondents Association (PCAN), in Abuja, last November.
At that conference, the Managing Director of Mainstream Energy Limited and Board member of NISO, Audu Lamu, lamented that consumers are unable to pay for energy due to economic realities of the day, inflation, declining purchasing power and inability of families and businesses to meet household and basic utility costs.
He said: “Millions of households in Nigeria still lack access to reliable electricity. For many, connection to the grid does not guarantee supply, and for others, the cost of energy remains beyond reach. Energy poverty is not just about a lack of connection but the inability to afford sufficient power for daily life and productive enterprise.”
That’s food for thought for electricity owners and government, even though it’s unacceptable for anybody to steal energy. Lamu’s argument is about balancing tariff with citizens’ capacity to pay. What’s the sense in raising tariffs that consumers can’t pay for, or would encourage theft?
The system cannot afford energy theft. The system is supposed to nourish itself from within. How come owners of electricity companies are so weak they’re unable to deal with energy theft? And how come they’re unable to prosecute offenders, if more than half of consumers are actually not paying?
From the streets, what is obvious is that a good number of the DisCos don’t have the strength to monitor. They hire ad hoc and poorly committed staff. They don’t invest, simply because government is there to pay subsidies.
National grid collapses
The Federal Government stoked confusion regarding its current metering scheme known as the Distribution Sector Recovery Programme (DISREP). It is funded through a $500 million facility from the World Bank, not a gift.
DISREP is the fifth metering programme launched by the government since privatisation, all running paripassu and disjointedly. But the confusion is that government claims DISREP is to be installed at no cost to consumers.
Apparently fed up with DisCos’ lack of capacity and sincerity, government decided to bypass them in DISREP. Smart DisCos in urban centres have keyed into it to meter their Band A customers. Others are reluctant to support DISREP because it is distributed directly by government at no initial cost to customers. At the appropriate time, government knows how to recoup the investment through the back-end or never.
The urgency for government is to encourage investors that their investments are recoverable through mass metering. Smart move. It is also a political statement for the Bola Ahmed Tinubu government to, at least, stabilise the downstream power sector before the 2027 elections.
In 2015, the All Progressives Congress (APC), played politics with electricity. They rubbished the privatisation exercise carried out by the former government, with the promise to fix the problems in six months. They promised to generate 40,000 Megawatts, but have hovered around 4,000 Megawatts in 11 years.
President Bola Tinubu said if he failed to provide affordable and constant electricity, if he seeks a second term, voters should deny him. Indeed, prospective voters have kept reminding him of that promise.
His minister of power advertised free meters when they know it is not free, they’re just playing politics with a serious matter. They’re pressed for time. But we encourage them to meter all households. What they have now is just a trickle.
Beyond that, let this government complement the privation blueprint of 2013 with more ground-breaking reforms. After all, governance ought to be a continuum. Encourage states to produce and distribute energy. More players will crash the cost and consumers will pay affordable tariffs.
It’s time to cut the monopoly enjoyed by the current operators. Their areas of coverage are far too large, beyond their capacities. Government should carve out three to four new DisCos from the existing distribution companies. Government’s 40 per cent holding should be given out as fresh licenses to new players. Government is reluctant to let go because of the privileges. But it’s hurting the sector.
Let NERC do its job. The minister is the policy formulator, not the regulator. In addition, let the Federal Government hands off Rural Electrification and channel the funding to states and local government electricity agencies.
There are bureaucracies with overlapping functions at the centre. They should be trimmed to reduce the sector’s liabilities and corruptions that are framed as subsidies. It’s up to President Tinubu to make power available and affordable!
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