The Federal Government has proposed a N3.6tn deduction from the Federation Account to fund electricity subsidies in 2026, 2027, and 2028, a move designed to distribute the financial burden across federal, state, and local governments.
The move represents a decisive step by the Federal Government to confront the rapidly mounting electricity subsidy debt, which has severely constrained liquidity across the power sector, while also strengthening fiscal transparency by making subsidy obligations explicit and better accounted for.
The deduction proposal, detailed in the Medium-Term Expenditure Framework Fiscal Strategy Paper for 2026–2028, analysed by one of our correspondents on Tuesday, reflects a strategic shift toward distributing the financial burden of the power sector across all tiers of government, amid growing concerns over unsustainable debts and systemic inefficiencies.
According to Table 6.2 of the MTEF document, which outlines “Other FAAC Deductions” under the Federation Account Revenue – Main Pool, VAT, and Stamp Duty, the electricity subsidy for 2026 is pegged at N1.2tn.
It is projected to remain at this level through 2027 and 2028, signalling the government’s commitment to stabilising the sector while preventing hidden liabilities from ballooning into a fiscal crisis.
“The document read, “Transfer to NBET (Electricity Subsidy) is estimated at N1.2tn in the 2026 budget proposal and projected to remain at N1.2tn each in 2027 and 2028.”
The proposed approach aligns with earlier statements by the Budget Office of the Federation, which indicated plans to end the practice of the Federal Government bearing electricity subsidy costs alone.
He added that from 2026, the Federal Government would no longer treat electricity subsidies as an open-ended obligation borne solely by the centre, especially where policy decisions and political benefits are shared.
“In 2026, we will stop pretending that this bill can be left to the Federal Government alone, especially where the policy choice or the political benefit is shared across tiers of government,” Yakubu said.
According to him, the President has instructed that the existing electricity sector legal framework be invoked to ensure that subsidy sharing is practical, transparent, and enforceable.
“This means subsidy costs must be explicit, tracked, and funded, so they do not return as arrears, liquidity crises, or hidden liabilities in the market,” he said. “If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed, and enforceable,” he stated.
Currently, the Federal Government finances electricity subsidies through direct budgetary allocations, primarily channelled via the Federal Ministry of Finance to the Nigerian Bulk Electricity Trading Plc.