FG Plans to End Electricity Subsidy by 2027 as Power Sector Reforms Intensify
The Federal Government has announced plans to gradually phase out electricity subsidy payments from 2027 as part of efforts to address financial challenges in Nigeria’s power sector and create a more sustainable electricity system.
The Minister of Power, Joseph Tegbe, disclosed this on Friday during a media engagement, where he spoke on the growing debt burden affecting the sector.
Tegbe said the subsidy removal would be implemented gradually alongside broader reforms aimed at improving the financial stability of the power industry, while assuring Nigerians that the government would continue working to improve electricity supply.
“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.
He added that the government was working towards ending power sector subsidies from next year while ensuring consumers are not deprived of electricity services.
“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’ll make sure Nigerian consumers continue to have power and improve power services,” Tegbe said.
Despite the planned subsidy phase-out, the minister said there were no immediate plans to increase electricity tariffs, noting that the government’s priority was to improve power supply and resolve longstanding financial issues in the sector.
Move Follows IMF Recommendation
The planned removal of electricity subsidy aligns with recommendations from the International Monetary Fund (IMF), which has consistently advised Nigeria to eliminate power subsidies as part of wider economic reforms.
The Federal Government had previously disclosed that electricity subsidies cost the country about ₦3 trillion as of February 2024, putting additional pressure on public finances.
The power sector has also continued to struggle with heavy debts, with the Association of Power Generation Companies (APGC) recently stating that government indebtedness to electricity generation companies (GenCos) had risen to about ₦6.5 trillion.
Government Begins Debt Reduction Programme
The announcement comes as the Tinubu administration continues efforts to clear outstanding debts within the electricity sector.
Following presidential approval, the government launched the ₦4 trillion Power Sector Debt Reduction Programme (PPSDRP) aimed at settling verified liabilities.
In January, the Federal Government issued a ₦501 billion bond under the programme to address part of the debt owed to power generation companies.
A second tranche worth about ₦729 billion was announced on July 20 as part of continued efforts to settle outstanding obligations.
Earlier this year, President Bola Tinubu directed ministries, departments and agencies to rely on existing electricity laws to determine how subsidy costs should be shared among federal, state and local governments when preparing the 2026 budget.
If implemented, the electricity subsidy phase-out would become another major economic reform under the Tinubu administration, following the removal of petrol subsidy and foreign exchange market reforms.
While the government argues that the move will help create a financially stable power sector and improve electricity delivery, the policy may raise concerns among Nigerians already facing high living costs, inflation and economic pressures.
