Nigeria TV Info 

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

Abuja, Nigeria — In a major fiscal policy shift, the Federal Government has proposed to deduct a total of N3.6 trillion from the Federation Account to fund electricity subsidies over the next three fiscal years (2026–2028). The move, outlined in the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF-FSP), seeks to address the growing debt crisis in the power sector and improve transparency in subsidy funding.

Under the new framework, an estimated N1.2 trillion will be deducted annually from the Federation Account — the shared revenue pool distributed to federal, state, and local governments — before allocations are made. This deduction represents a first-line charge on revenue, meaning the funds will be removed before statutory revenue is shared among the tiers of government.

The Budget Office of the Federation has said the policy will spread the cost of electricity subsidies across the federation rather than making the Federal Government bear the full burden. Director-General Tanimu Yakubu explained that the president directed this approach to make subsidy costs explicit, tracked, and enforceable across federal, state and local governments beginning in 2026.

According to the MTEF document, electricity subsidy obligations have strained federal finances, contributing to mounting sector debt projected to reach about N6.5 trillion by the end of 2025. Historically, the federal government funded subsidies through budgetary allocations to the Nigerian Bulk Electricity Trading Plc (NBET), which bridges the gap between electricity generation costs and regulated tariffs.

Energy sector analysts argue the new deduction mechanism will enhance fiscal discipline, reduce hidden liabilities, and incentivise efficiency. However, some experts caution that states and local governments will need clear data and frameworks to equitably share costs without deepening sub-national fiscal stress.

The proposed deduction marks a significant shift from past practice and aligns with broader reforms aimed at stabilising Nigeria’s power sector while ensuring the subsidy regime becomes more transparent and sustainable.