FG to Deduct N3.6tn from Federation Account for Electricity Subsidy

The Federal Government has proposed a N3.6 trillion deduction from the Federation Account to fund electricity subsidies between 2026 and 2028, a move aimed at sharing the financial burden among the federal, state and local governments.

The proposal, contained in the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for 2026–2028, represents a shift in government policy as it seeks to address the growing electricity subsidy debt that has continued to strain the power sector.

Under the plan, N1.2 trillion has been earmarked annually for electricity subsidies in 2026, 2027 and 2028. The funds are expected to be deducted directly from the Federation Account, covering revenues from the main pool, VAT and stamp duties.

According to the MTEF document, the subsidy allocation will be transferred to the Nigerian Bulk Electricity Trading Plc (NBET) to support the sector and prevent liquidity challenges from worsening across the electricity value chain.

The government said the approach would improve fiscal transparency by explicitly accounting for subsidy costs, rather than allowing them to accumulate as hidden liabilities. It also reflects growing concerns over the sustainability of electricity subsidies and their impact on public finances.

The proposal aligns with earlier indications from the Budget Office of the Federation that the Federal Government would no longer shoulder electricity subsidy costs alone, but instead distribute the responsibility across all tiers of government.