Electricity subsidy: FG to deduct N3.6tn from Federation Account

Power grid

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 PUNCH reports.

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 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 PUNCH reports.

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.