FG to phase out electricity subsidy from 2027 as power sector debts rise

Minister of Power Joseph Tegbe

FG to phase out electricity subsidy from 2027 as power sector debts rise

The Federal Government has announced plans to gradually phase out electricity subsidies from 2027 as part of efforts to address rising debts in the power sector, improve financial sustainability and strengthen electricity supply across the country.

Minister of Power Joseph Tegbe disclosed the plan during a media interactive session on Friday, saying the government would introduce the changes gradually while ensuring that Nigerians continue to have access to electricity.

Tegbe said the Federal Government had received a mandate from President Bola Tinubu to clear outstanding debts in the electricity industry and establish a sustainable system that would prevent the accumulation of new obligations.

“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,” the minister said.

He expressed confidence that the government would bring an end to the current electricity subsidy arrangement in 2027 while working to improve the quality and reliability of power supply.

“I promise you, next year, by God’s grace, we will put a stop to this so-called subsidy in the power sector,” Tegbe said.

The minister assured consumers that the planned reforms would not result in a loss of access to electricity services.

According to him, the government’s objective is to reduce the financial burden created by the subsidy system while improving the performance of the electricity sector.

READ ALSO:

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

Tegbe also stated that there was no immediate plan to increase electricity tariffs, despite concerns that the proposed phase-out of subsidies could lead to higher electricity bills.

However, the minister did not provide details on the timetable for the subsidy withdrawal, the categories of consumers that may be affected or the measures that would be introduced to protect low-income and vulnerable households.

The planned reform comes amid growing concerns over the financial challenges facing Nigeria’s electricity industry.

The Federal Government previously estimated the cost of electricity subsidies at about ₦3 trillion as of February 2024, while power generation companies, known as GenCos, have continued to report significant unpaid obligations.

The Association of Power Generation Companies has said electricity generation companies are owed about ₦6.5 trillion, raising concerns about the financial health of the sector and its ability to sustain electricity generation.

The outstanding debts include unpaid invoices and other obligations linked to electricity supplied to the national grid.

To address the problem, President Tinubu recently approved a ₦4 trillion power sector debt reduction programme aimed at settling verified legacy debts and improving liquidity across the electricity value chain.

The programme is expected to support the payment of outstanding obligations owed to power generation companies and other participants in the sector.

In January 2026, the Federal Government issued an inaugural ₦501 billion bond under the Presidential Power Sector Debt Reduction Programme.

The bond was designed to help settle verified debts owed to electricity generation companies and support efforts to stabilise the sector.

On July 20, the government announced a second tranche of about ₦729 billion to settle additional verified debts owed to power generation companies.

The debt-settlement programme is expected to reduce financial pressure on electricity producers and improve their capacity to maintain operations, pay gas suppliers and invest in power infrastructure.

The proposed subsidy phase-out also aligns with recommendations by the International Monetary Fund (IMF), which has encouraged Nigeria to gradually reduce broad electricity subsidies and adopt more targeted support for households that need assistance.

Supporters of the reform argue that reducing subsidies could improve the financial viability of the electricity market, attract private investment and help power companies maintain and expand infrastructure.

However, consumer groups and businesses have raised concerns that higher electricity costs could increase financial pressure on households and raise operating expenses for companies.

The impact of the proposed reform may depend on the government’s ability to improve electricity supply, expand access to prepaid meters, reduce estimated billing and ensure that consumers receive better services.

Earlier this year, President Tinubu also directed ministries, departments and agencies to apply existing electricity laws in determining how subsidy costs should be shared among the federal, state and local governments in the 2026 budget.

The move is expected to support a more coordinated approach to electricity financing following reforms that expanded the role of state governments in electricity generation, transmission and distribution.

As the 2027 target approaches, the Federal Government is expected to provide more details on the implementation framework, consumer protection measures and the steps that will be taken to prevent the reforms from causing undue hardship.

The government will also face growing pressure to ensure that improvements in electricity generation, transmission and distribution accompany the gradual withdrawal of subsidies.

For many consumers, the success of the policy may ultimately be measured by whether it delivers more reliable electricity, fair billing, improved customer service and better value for money.