FG To End Electricity Subsidy From 2027

The Federal Government has announced plans to gradually phase out electricity subsidy payments from 2027 as part of measures to tackle the growing financial burden in Nigeria’s power sector.

Minister of Power, Joseph Tegbe, disclosed the plan during a media briefing on Friday, explaining that the government was working on lasting solutions to prevent the accumulation of debts while ensuring electricity supply to consumers is not disrupted.

He said the administration had received approval from President Bola Tinubu to address the sector’s long-standing debts and establish a more sustainable financing structure. According to the minister, the government intends to end the current electricity subsidy arrangement next year while maintaining power supply and improving service delivery across the country.

Tegbe also clarified that there are no immediate plans to increase electricity tariffs despite the proposed withdrawal of subsidies.

The planned phase-out is in line with recommendations from the International Monetary Fund (IMF), which has repeatedly advised Nigeria to gradually remove electricity subsidies as part of wider economic reforms.

The power sector has continued to face serious financial challenges due to unpaid subsidy obligations. As of February 2024, the Federal Government estimated the electricity subsidy bill at about ₦3 trillion, while the Association of Power Generation Companies stated that electricity generation companies are owed approximately ₦6.5 trillion.

To reduce the debt burden, the Tinubu administration has introduced several financing measures. President Tinubu recently approved a ₦4 trillion bond programme aimed at settling outstanding liabilities in the power sector.

In January, the government issued an inaugural bond worth ₦501 billion under the Presidential Power Sector Debt Reduction Programme. On July 20, it also announced a second tranche valued at about ₦729 billion to pay verified debts owed to electricity generation companies.

The latest move follows an earlier directive by President Tinubu instructing ministries, departments and agencies to apply existing electricity laws in determining how electricity subsidy costs should be shared among the federal, state and local governments in preparing the 2026 budget.

The government believes the gradual removal of electricity subsidies will help improve the financial health of the power sector while creating a more sustainable system for electricity generation and distribution in Nigeria.