Nigeria Plans to End Electricity Subsidy Payments from 2027

The Federal Government of Nigeria plans to phase out electricity subsidy payments from 2027 as it moves to clear billions of naira in legacy debts owed across the power sector and establish a more financially sustainable electricity market.

The Minister of Power, Joseph Tegbe, disclosed this on Friday during a media interactive session, saying the government would gradually withdraw the subsidy while maintaining electricity access and improving services for consumers.

The minister stated that the decision was part of President Bola Tinubu's broader mandate to resolve the sector's accumulated debts and prevent the recurrence of the financial obligations that have strained the electricity market.

“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 any more,” Tegbe said.

He added that the government would ensure that the removal of the subsidy did not deprive Nigerians of electricity.

“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, we will not deprive Nigeria of anything. We’ll make sure Nigerian consumers continue to have power and improve power services.”

Government moves to clear power sector debts

The announcement comes as the government intensifies efforts to address the financial crisis in the electricity industry, where accumulated debts have affected the ability of power generation and distribution companies to operate sustainably.

The government has previously estimated the electricity subsidy burden at about N3 trillion as of February 2024, while the Association of Power Generation Companies has put outstanding debts owed to generating companies at approximately N6.5 trillion.

Tegbe emphasised that the government had no immediate plans to increase electricity tariffs, suggesting that the planned subsidy reforms would focus first on restructuring the sector's finances and settling outstanding obligations.

The planned phase-out also comes against the backdrop of recommendations by the International Monetary Fund that Nigeria gradually withdraw electricity subsidies as part of broader reforms to improve the financial sustainability of the power sector.

The government has already begun implementing measures to settle verified debts owed to power producers. President Bola Tinubu approved a N4 trillion bond programme under the Presidential Power Sector Debt Reduction Programme to address outstanding liabilities in the industry.

In January, the government issued its first N501 billion bond under the programme. On July 20, it announced a second tranche of about N729 billion to settle verified debts owed to power generation companies.

Federal government is also reviewing how electricity subsidy costs should be shared among the federal, state and local governments. Earlier in the year, Tinubu directed ministries, departments and agencies to apply existing electricity laws in determining the allocation of subsidy obligations in the 2026 budget.

The planned withdrawal of subsidies represents a major policy shift for Nigeria's electricity sector, with the government seeking to replace recurring public funding with a more financially sustainable framework. Its success will depend on whether the authorities can resolve existing debts, improve electricity supply and protect consumers from excessive cost pressures as the subsidy regime is phased out.