FG to Deduct N3.6tn for Electricity Subsidy From Federation Account
Last update: February 4, 2026
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Annual N1.2tn deduction planned from 2026 to 2028 to share subsidy costs across all tiers of government.
The Federal Government has proposed a N3.6tn deduction from the Federation Account to fund electricity subsidies between 2026 and 2028, as part of efforts to address rising power sector debt and improve fiscal transparency.
Details contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper for 2026 to 2028 show that N1.2tn will be deducted annually as a first line charge from the Federation Account Allocation Committee pool before revenues are shared among the Federal Government, states and local governments.
The government said the move is aimed at ending the practice of the Federal Government bearing electricity subsidy costs alone, while making subsidy obligations explicit and better accounted for.
Director General of the Budget Office, Tanimu Yakubu, said President Bola Tinubu had directed that electricity subsidies be tracked, funded and fairly shared across all tiers of government, warning that unfunded subsidies often reappear as arrears and liquidity crises in the power sector.
Currently, subsidy payments are channelled through the Nigerian Bulk Electricity Trading Plc, which absorbs the gap between regulated tariffs and the actual cost of power generation.
Accumulating unpaid obligations have pushed sector debt to an estimated N6.5tn by the end of 2025.
Energy policy expert Habu Sadeik said the deduction would reduce distributable revenue for states and local governments but ensure predictable funding for subsidies, similar to the approach used for the Presidential Metering Initiative.
