The Federal Government has proposed a deduction of ₦3.6 trillion from the Federation Account to finance electricity subsidies over the next three years, covering 2026, 2027, and 2028. The move is aimed at addressing the rapidly growing subsidy burden in the power sector while spreading the financial responsibility across the federal, state, and local governments.
Details of the proposal are contained in the Medium-Term Expenditure Framework (MTEF) Fiscal Strategy Paper for 2026–2028. According to the document, electricity subsidy payments to the Nigerian Bulk Electricity Trading Plc (NBET) are estimated at ₦1.2 trillion annually for each of the three years, signalling a shift toward making subsidy obligations more transparent and properly accounted for in government finances.
The Budget Office of the Federation explained that President Bola Tinubu has directed that electricity subsidies should no longer remain an implicit or open-ended federal commitment. Budget Office Director-General, Tanimu Yakubu, noted that when electricity tariffs are held below the actual cost of production, the resulting gap becomes a subsidy bill that must be clearly funded and shared fairly across all tiers of government.
Under the current arrangement, the Federal Government covers electricity subsidies through budgetary allocations channelled to NBET, which purchases power from generation companies and sells to distribution firms at regulated tariffs. However, unpaid subsidy obligations have worsened liquidity challenges across the sector, with outstanding debts projected to rise to about ₦6.5 trillion by the end of 2025.
Energy policy experts say the new approach will involve deducting subsidy funds directly from the FAAC revenue pool before allocations are shared, meaning states and local governments will indirectly contribute. While some stakeholders have welcomed the proposal as consistent with federalism and accountability, state energy commissioners say they will review the policy’s implications before taking a final position.
