The Federal Government under President Bola Ahmed Tinubu has announced plans to phase out electricity subsidy payments from 2027, a move that could reshape Nigeria's power sector and potentially increase the financial burden on millions of consumers.
Minister of Power, Joseph Tegbe, disclosed the plan on Friday during a media interactive session while addressing the growing debt in the electricity sector.
According to the minister, the subsidy will be removed gradually as part of broader reforms aimed at making the power sector financially sustainable, although he insisted Nigerians would continue to enjoy improved electricity services.
"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," Tegbe 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'll make sure Nigerian consumers continue to have power and improve power services."
Despite the planned phase-out, Tegbe assured Nigerians that there are no immediate plans to increase electricity tariffs, stressing that the government's priority is to improve power supply while addressing the sector's longstanding financial challenges.
Move aligns with IMF recommendation
The proposed removal of electricity subsidy is in line with recommendations by the International Monetary Fund (IMF), which has repeatedly urged Nigeria to eliminate subsidies in the power sector as part of broader economic reforms.
The Federal Government has previously disclosed that electricity subsidies cost about ₦3 trillion as of February 2024, placing significant pressure on public finances.
The power sector has also been weighed down by mounting debts, with the Association of Power Generation Companies (APGC) recently stating that the government owes electricity generation companies (GenCos) about ₦6.5 trillion.
Government moves to clear power sector debt
The announcement comes as the Tinubu administration intensifies efforts to settle outstanding debts in the sector.
Following presidential approval, the government has begun implementing a ₦4 trillion Power Sector Debt Reduction Programme (PPSDRP).
In January, the Federal Government issued an inaugural ₦501 billion bond under the programme to offset part of the legacy debt owed to electricity generation companies.
On July 20, it also announced the issuance of a second tranche worth about ₦729 billion to continue the settlement of verified debts.
Earlier this year, President Bola Tinubu directed all ministries, departments and agencies (MDAs) to rely on existing electricity laws to clearly define how subsidy costs should be shared among the federal, state and local governments in preparing the 2026 budge
If implemented as planned, the subsidy phase-out from 2027 would mark another major economic reform by the Tinubu administration, following the removal of petrol subsidy and the unification of the foreign exchange market.
While the government argues the move is necessary to make the electricity sector financially viable and improve service delivery, it is expected to raise concerns among Nigerians already grappling with rising living costs and persistent inflation.