Nigeria’s electricity sector is heading for another major policy shift, with the Federal Government targeting 2027 for the phase-out of electricity subsidies and a move towards cost-reflective tariffs.
The government says the reform is necessary to address mounting debts in the power sector, attract investment and improve electricity supply, while measures are being developed to protect poor and vulnerable consumers.
But what exactly does the planned subsidy phase-out mean for electricity tariffs and consumers? Will Nigerians pay more for electricity, and will improve service delivery follow? The FactCheckHub examines the government’s plan, the arguments for and against it, and what consumers should expect.
Why is the Federal Government ending electricity subsidies?
On 22 July 2026, the Special Adviser to the President on Power Infrastructure, Sadiq Wanka, said the Federal Government had reaffirmed its plan to phase out electricity subsidies and transition to cost-reflective tariffs across the power sector.
Speaking at Asharami Square 3.0, Wanka said the transition would be implemented with measures to protect poor and vulnerable Nigerians.
On 31 July, Minister of Power Joseph Tegbe said the government was targeting 2027 to end electricity subsidy payments, as part of wider reforms aimed at restructuring the power sector.
Tegbe said the decision was driven largely by the need to address mounting debts and establish a more financially sustainable electricity market.
According to him, continued government intervention has contributed to a cycle of debt accumulation in the sector. Ending the subsidy is expected to reduce the buildup of liabilities and allow the market to operate with less reliance on government funding.
The government also says the reform is intended to attract private investment. Under the current system, financial challenges in the electricity market have limited investment in generation, transmission and distribution infrastructure.
The move towards cost-reflective tariffs, officials argue, would create a more predictable market for investors and support improvements in electricity supply and infrastructure.
What is the current state of power sector investments?
Nigeria faces a significant gap between the amount currently invested in the electricity sector and what the government says is required to meet future demand.
During his presentation at Asharami Square 3.0, Wanka said Nigeria currently attracts about $1 billion annually in investment across generation, transmission and distribution.
However, he estimated that the country would require between $9 billion and $12 billion annually through 2045 to achieve universal electricity access and meet industrial demand.
Based on projections from the Nigeria Integrated Resource Plan, Wanka put the sector’s total long-term investment requirement at about $121 billion.
He also projected that by 2045, about 80 per cent of Nigeria’s installed electricity generation capacity could come from solar and hydropower.
Wanka said the shift towards renewable energy was driven primarily by economic considerations, describing it as a least-cost option rather than a decision based solely on climate concerns.
Will electricity tariffs increase immediately?
Tegbe assured consumers that the administration’s immediate priority is to improve electricity supply and service delivery rather than increase tariffs.
“Our priority is not a tariff increase in the meantime. Our priority is service improvement, universal access, and ensuring Nigerians only pay for everything that they actually consume,” Tegbe stated.
He pointed out that power supply has improved in recent months, with several communities receiving up to 16 hours of electricity daily, expressing optimism that ongoing infrastructure projects will further stabilise supply over the coming years.
This means the planned end of subsidies should not automatically be interpreted as an announcement that electricity tariffs will increase immediately. Any future tariff adjustments would depend on the government’s implementation of the reform and the regulatory process.
What do industry analysts and consumer advocates say?
The proposed reform has drawn different reactions from stakeholders in the electricity sector.
Energy expert and Managing Director of New Hampshire Capital Ltd, Odion Omonfoman, said changes to electricity subsidies and tariffs require both government policy and regulatory action.
“Removing electricity subsidies is not only a policy issue but also a regulatory matter, hence the necessary regulations for tariff reviews need to be made by Nigerian Electricity Regulatory Commission (NERC),” Omonfoman said.
He added that the process should involve consultations with relevant stakeholders.
Omonfoman argued that the current financial arrangement was unsustainable and said it was time for the government to reverse the subsidy policy and allow market-based electricity tariffs.
Consumer advocates, however, have expressed concerns about the proposed shift.
Uket Obonga, National Secretary of the Nigeria Electricity Consumers Advocacy Network (NECAN), opposed the policy, warning that removing what he described as a “phantom subsidy” could worsen the economic pressure on Nigerians.
Obonga argued that what is described as electricity subsidy is, in reality, a market revenue shortfall.
“What they call Subsidy is actually Market Revenue Shortfalls which is largely the difference between the value of invoices issued to the DISCOs and the actual amount generated through billing and amounts collected,” he said.
He said high Aggregate Technical, Commercial and Collection (ATC&C) losses, which he put at between 30 per cent and 40 per cent, were a major contributor to the shortfalls.
According to Obonga, poor metering and inadequate investment in distribution infrastructure have made it difficult for distribution companies (DisCos) to meet their revenue collection obligations.
Rather than simply withdrawing financial support, he called for stronger regulatory oversight and enforcement of market rules.
“FG should rather strengthen the governance and regulatory capacity to ensure compliance with market rules and enforcement of discipline and sanctions where breaches occur,” he said.
He also suggested that the subsidy debate could be used to justify an imminent tariff increase.
What could the subsidy phase-out mean for Nigerians?
The impact of the policy will depend largely on how the phase-out is implemented.
If subsidies are withdrawn without corresponding improvements in electricity supply, metering, billing and distribution infrastructure, consumers could face higher costs without receiving better service.
On the other hand, the government argues that moving towards cost-reflective tariffs will improve the financial sustainability of the electricity market, attract investment and ultimately improve service delivery.
For consumers, the key issues to watch will therefore be tariff changes, protection for vulnerable households, improvements in electricity supply, metering and the performance of distribution companies.
