FG to Phase Out Power Sector Subsidy From 2027

The Federal Government has announced plans to phase out subsidy payments in Nigeria’s power sector from 2027 as part of efforts to create a financially sustainable electricity market.

Minister of Power, Joseph Tegbe, disclosed the plan on Friday during a media interactive session, where he addressed issues surrounding the sector’s mounting debt and ongoing reforms.

According to the minister, the government intends to gradually eliminate the subsidy while ensuring Nigerians continue to enjoy access to electricity without an immediate increase in tariffs.

Tegbe emphasised that the administration of President Bola Tinubu remains committed to improving electricity services while addressing the financial challenges facing the sector.

“We have the mandate of Mr. President to clear the legacy debt and come up with sustainable structures to make sure this doesn’t pile up anymore,” he said.

“I promise you, next year, by God’s grace, we will put a stop to this so-called subsidy in the power sector. Mr. President will not deprive Nigerians of anything. We will make sure Nigerian consumers continue to have power and improve power services.”

The minister also reiterated that there are no immediate plans to increase electricity tariffs despite widespread speculation.

The planned subsidy phase-out aligns with recommendations from the International Monetary Fund, which has consistently advised Nigeria to remove electricity subsidies to improve the financial viability of the sector.

The Federal Government had previously estimated the electricity subsidy burden at about N3 trillion as of February 2024.

Meanwhile, the Association of Power Generation Companies recently disclosed that the government owes generating companies approximately N6.5 trillion in outstanding obligations.

To address the debt, the Tinubu administration has introduced several financing measures.

Following presidential approval for a N4 trillion bond programme aimed at reducing power sector debt, the government issued an inaugural bond worth N501 billion in January under the Presidential Power Sector Debt Reduction Programme.

On July 20, the government announced a second tranche valued at about N729 billion to settle verified legacy debts owed to electricity generation companies.

Earlier this year, President Tinubu also directed all ministries, departments and agencies to rely on existing electricity laws in determining how subsidy costs would be shared among the Federal, state and local governments in preparing the 2026 budget.

The government says the reforms are designed to strengthen the electricity market, improve investor confidence and guarantee more reliable power supply across the country.