FG Says Electricity Subsidy Will End in 2027, Confirms Decision on Tarrif Hike
- Minister of Power Joseph Tegbe announced the federal government's plan to phase out electricity subsidies starting in 2027
- The plan follows a growing debt crisis in Nigeria's power sector, with generation companies reportedly owed around N6.5 trillion
- President Tinubu approved a N4 trillion bond programme earlier this month to begin clearing legacy debts across the electricity value chain
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Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The federal government has said it will end electricity subsidies from 2027, with the Minister of Power, Joseph Tegbe, confirming the plan at a media interactive session on Friday.
Tegbe said President Bola Tinubu had given the government a direct mandate to clear existing debts in the power sector and build structures that prevent new liabilities from piling up.
Source: Getty Images
He added that the planned phase-out would not mean fewer Nigerians getting electricity or a drop in service quality.
Tegbe said:
"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."
"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."
The minister also made clear that there are no plans to raise electricity tariffs in the meantime, despite the subsidy removal timeline.
Nigeria's Power Sector Debt Crisis
The announcement comes as the financial burden on Nigeria's electricity sector continues to mount, the Cable reports
The federal government put the cost of electricity subsidies at roughly N3 trillion as of February 2024, while the Association of Power Generation Companies (APGC) says generation firms are owed close to N6.5 trillion in unpaid obligations.
To begin addressing the shortfall, President Tinubu approved a N4 trillion bond programme earlier this month to settle legacy debts across the sector.
In January, the government had already issued a first bond worth N501 billion under the Presidential Power Sector Debt Reduction Programme. A second tranche of about N729 billion was announced on July 20 to pay down additional amounts owed to generation companies.
The debt repayment effort is meant to free up cash flow within the sector, allowing generation companies to cover operating costs, upgrade infrastructure and improve electricity supply to consumers.
The subsidy phase-out also aligns with longstanding recommendations from the International Monetary Fund (IMF), which has urged Nigeria on several occasions to wind down electricity subsidies to strengthen the sector's finances and ease pressure on government spending.
Source: Getty Images
Sharing Subsidy Costs Among Tiers of Government
The government has also been working out how subsidy costs should be split between the federal, state and local governments, PremiumTimes reports.
Earlier this year, President Tinubu directed ministries, departments and agencies to use existing electricity laws to determine the right formula for sharing those obligations, as part of planning for the 2026 budget.
Taken together, the debt repayment programme and the planned subsidy removal signal a broader push by the Tinubu administration to reform Nigeria's electricity market and reduce its dependence on government funding to keep the sector running.
Power blackout
Legit.ng previously reported that the Abuja Electricity Distribution Company (AEDC) notified customers of a planned power interruption expected to last approximately 19 hours across several communities in Kogi State.
In a public notice, the distribution company said the outage would affect customers in Lokoja, Konton Karfe, the Naval Base, Banda, Felele, the Army Barracks and nearby areas.
AEDC explained that the temporary disruption is necessary to allow the Transmission Company of Nigeria (TCN) to carry out scheduled maintenance work at the Lokoja Transmission Station.
Source: Legit.ng
