Nigeria’s electricity subsidy programme channelled the bulk of its 2025 support to consumers in the middle service categories, with Bands B and C accounting for 70 per cent of the N1.93tn spent by the Federal Government, a fresh industry assessment has revealed.
The study, conducted by ZKJ Energy Partner Limited, also found that consumers in Band A did not benefit from the subsidy. Instead, their tariff payments generated an estimated N101bn that helped finance electricity support for customers in the other bands.
The report, obtained by our correspondent on Monday, put the value of support received by Band B customers at N741bn, representing 38 per cent of the total amount. Band C followed with N609bn, accounting for 32 per cent.
Band D consumers received an estimated N452bn, equivalent to 24 per cent, while Band E accounted for N227bn, representing 12 per cent.
The figures indicate that consumers in Bands B and C, rather than those at the bottom of the service structure, captured the largest share of the Government’s electricity subsidy.
ZKJ Energy Partner said the outcome runs contrary to the common understanding that the intervention is primarily targeted at protecting the country’s poorest electricity users from higher tariffs.
It explained that customers in Bands D and E generally require greater tariff support because of the wider difference between their approved electricity prices and the actual cost of generation. However, their relatively low power consumption means that their overall share of the subsidy remains below that of Bands B and C.
Band A customers were placed in a different position because they pay a tariff that is slightly higher than the estimated cost of supplying them with electricity.
The category covers consumers who are guaranteed a minimum of 20 hours of electricity every day. Rather than drawing from the subsidy pool, these customers generated an estimated N101bn surplus that was used to reduce the amount required to support other consumers.
The report estimated that the total subsidy bill would have been N2.03tn without this contribution from Band A customers. After the N101bn was effectively offset against the requirement, the net subsidy figure came down to N1.93tn.
The analysis described the arrangement as a form of cross-subsidisation, whereby payments from Band A consumers help cover part of the cost of supplying customers in Bands B, C, D and E.
It further noted that the relationship between electricity costs and tariffs is reversed across the service categories. While the expense associated with supplying electricity rises from Band A to Band E, the tariffs paid by consumers decline across the same categories.
According to the report, consumers in Bands B through E were paying between N16 and N22 less per kilowatt-hour than the estimated cost of generating their electricity. The calculation excluded transmission and distribution costs as well as losses arising from technical, commercial and collection challenges.
ZKJ Energy Partner arrived at its generation-cost estimates using a merit-order model. Under the approach, generating plants were arranged according to their production costs, beginning with the least expensive sources.
Power was then assigned in four-hour increments, with each service band initially supplied by cheaper generating plants. As the required supply hours increased, more expensive generation sources were brought into the mix.
The report said the cost of providing additional electricity tends to rise as supply commitments increase because meeting higher demand requires reliance on progressively more expensive generation capacity.
The financial pressure created by the subsidy was also reflected in the Nigerian Electricity Regulatory Commission’s first-quarter 2026 figures, according to the report.
It stated that the Federal Government provided N358.32bn in tariff support during the quarter, covering 51.95 per cent of the total cost of electricity generation.
The study also questioned the current approach of applying broadly similar tariff structures across different electricity distribution companies, arguing that the system fails to sufficiently account for differences in network efficiency.
It pointed to Yola Electricity Distribution Company, which recorded an estimated 44 per cent loss level, and Ikeja Electric, with approximately 14 per cent, as examples of the gap between poorly and better-performing networks.
ZKJ Energy Partner argued that customers served by inefficient distribution networks have limited financial motivation to demand improved performance because tariffs do not adequately reflect the level of losses within individual networks.
It therefore recommended a regulatory model that links electricity pricing and performance more closely to the efficiency of each distribution franchise.
The report also identified inadequate transmission and distribution infrastructure and unreliable gas availability as more serious constraints on the electricity market than distortions created by the merit-order system.
It stressed that generating electricity at a low cost does not solve the problem when available power cannot be transmitted or distributed to consumers.
To address the challenges, the report called for increased investment in transmission and distribution infrastructure, reliable gas supplies for power generation, stronger measures to reduce aggregate technical, commercial and collection losses, and regulation based on established loss-performance benchmarks.
It also advised that these measures should be implemented before any move to ease restrictions surrounding must-run generation arrangements.
The electricity subsidy remains a significant burden on Nigeria’s public finances as the Federal Government continues to keep tariffs below cost-reflective levels for many consumers. Under the existing classification system, customers are placed in Bands A to E according to the minimum number of hours of electricity supply guaranteed to them, with Band A receiving the highest service commitment.
