Nigeria: Federal Government To Phase Out Electricity Subsidies From 2027

Nigeria plans to phase out electricity subsidies from 2027, Power Minister Joseph Tegbe said on Friday, as the government seeks to tackle mounting debt in the power sector.

Speaking during a media briefing, Tegbe said the government would gradually eliminate electricity subsidies from next year but pledged that consumers would continue to receive reliable power services.

“We have the mandate of Mr. President to clear the legacy debt and put in place sustainable structures to ensure this does not accumulate again,” Tegbe said.

“By God’s grace, next year we will put a stop to this so-called subsidy in the power sector. We will not deprive Nigerians of anything. We will ensure consumers continue to have electricity while improving power services,” he added.

Tegbe also said the government had no immediate plans to raise electricity tariffs.

The planned phase-out is in line with recommendations by the International Monetary Fund (IMF), which has urged Nigeria to remove electricity subsidies as part of broader fiscal reforms.

The federal government has previously highlighted the growing cost of electricity subsidies, estimating the burden at about 3 trillion naira ($1.9 billion) as of February 2024.

The Association of Power Generation Companies (APGC) has said the government owes power generation companies about 6.5 trillion naira in outstanding payments.

Tegbe’s announcement comes as the government steps up efforts to reduce the sector’s debt. President Bola Tinubu has approved the issuance of a 4 trillion naira bond to settle legacy obligations in the electricity sector.

In January, the government issued an inaugural 501 billion naira bond under the Presidential Power Sector Debt Reduction Programme (PPSDRP). On July 20, it announced a second tranche worth about 729 billion naira to settle verified legacy debts owed to power generation companies.

Earlier this year, Tinubu directed all ministries, departments and agencies to rely on existing electricity sector laws to determine how electricity subsidy costs should be shared among the federal, state and local governments in preparing the 2026 budget.