Nigeria targets end of electricity subsidy from 2027, rules out immediate tariff hike

THE Nigerian government says it plans to discontinue subsidy payments in the electricity sector from 2027 as part of efforts to establish a more sustainable financing model for the industry.

Minister of Power, Dr Joseph Tegbe, disclosed the plan during a media briefing on Friday while addressing the mounting liabilities in the power sector. He explained that although the subsidy regime would be phased out, electricity consumers would continue to enjoy improved access to power without losing existing benefits.

Tegbe stressed that the government has no intention of raising electricity tariffs in the near term. According to him, President Bola Tinubu has directed the ministry to eliminate the sector’s legacy debt and put in place measures that will prevent a fresh build-up of unpaid 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 anymore,” the minister said, adding that the government hopes to end the power sector subsidy by next year while ensuring Nigerians continue to receive better electricity services.

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The planned withdrawal of the subsidy is consistent with recommendations by the International Monetary Fund (IMF), which has repeatedly urged Nigeria to phase out electricity subsidies. The Federal Government had previously estimated the subsidy bill at about N3 trillion as of February 2024.

The announcement also comes against the backdrop of growing debts owed to electricity producers. The Association of Power Generation Companies (APGC) recently put the outstanding debt owed to generation companies at about N6.5 trillion.

To address the liabilities, the government has begun implementing a debt reduction programme backed by presidential approval for a N4 trillion bond issuance. It floated an inaugural N501 billion bond in January under the Presidential Power Sector Debt Reduction Programme (PPSDRP), followed by a second tranche worth about N729 billion announced on July 20 to settle verified legacy debts owed to GenCos.

Earlier this year, President Bola Tinubu also directed ministries, departments and agencies (MDAs) to apply existing electricity laws in determining how subsidy obligations would be shared among the federal, state and local governments in preparing the 2026 budget.