Nigeria Can’t Build A Viable Power Market While Government Leaves Bills Unpaid
By The Word
Nigeria’s electricity reform faces a simple test: if consumers are being asked to pay the real cost of power, Government must also pay for the electricity it consumes.
The Federal Government’s move to reduce electricity subsidies is necessary, but subsidy reform alone will not make the power market financially sustainable.
The bigger question is whether money will actually flow through the electricity value chain.
The Nigerian Electricity Regulatory Commission (NERC) reported that the Federal Government’s tariff subsidy obligation fell from ₦418.79 billion in Q4 2025 to ₦358.32 billion in Q1 2026, a decline of ₦60.46 billion, or 14.44 per cent.
But NERC said the reduction was driven largely by lower electricity offtake by Distribution Companies (DisCos), rather than a major improvement in tariff recovery.
That distinction matters.
A lower subsidy bill does not automatically mean a healthier electricity market.
If Government reduces its subsidy obligations while public institutions continue accumulating unpaid electricity bills, the financial burden simply shifts from Government to DisCos.
There should be no free electricity, including for Government.
Police and military formations, ministries, hospitals, schools and other public institutions all consume electricity. Where Government wants them subsidised, the funding should be explicitly provided in the budget.
What should stop is allowing unpaid MDA electricity bills to pile up as receivables on DisCo balance sheets.
The consequences are wider than the DisCos. Unpaid bills weaken their ability to meet market obligations, affecting Generation Companies, gas suppliers and ultimately electricity supply.
It also discourages banks and investors from putting fresh capital into the sector.
Government therefore needs to treat the settlement of verified MDA electricity debts as part of electricity-market reform, not simply as a bailout for DisCos.
The next phase should focus on five things: clear verified Government debts; put MDAs on funded and metered electricity budgets; ensure monthly payment of public-sector bills; align subsidy removal with actual revenue recovery; and enforce financial discipline across the entire electricity value chain.
The principle is straightforward:
Consume. Bill. Collect. Remit. Invest.
Consumers must pay. DisCos must collect and remit. GenCos must generate. Gas suppliers must supply. And Government must pay for the electricity consumed by its institutions.
If Government wants to subsidise a consumer, it should do so transparently through the budget, not through unpaid bills sitting on a DisCo’s balance sheet.
Nigeria does not need a power market with merely less subsidy. It needs one with enough liquidity to pay its bills, finance investment and deliver reliable electricity.
Remove the subsidy, yes. But remove the unpaid Government debt that has become another hidden subsidy.
The Word! email address: theword_electricity@gmail.com
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