Nigeria’s Federal Government has proposed deducting ₦3.6tn from the Federation Account to fund electricity subsidies in 2026, 2027 and 2028, so the cost is shared among the Federal Government, Nigeria’s 36 states and local governments.
The plan is contained in the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF-FSP) for 2026 to 2028. It lists a “Transfer to Nigerian Bulk Electricity Trading Plc (NBET)” as an “Other Federation Account Allocation Committee (FAAC) Deduction”, meaning the money would be taken from the shared revenue pool before allocations are distributed. The subsidy is set at ₦1.2tn in 2026 and projected to remain ₦1.2tn each in 2027 and 2028.
Okay News reports that officials say the aim is to reduce unpaid subsidy bills, improve liquidity in the power market and make the obligation clearer in public accounts.
Subsidies are funded mainly through federal budget allocations routed via Nigeria’s Federal Ministry of Finance to NBET, which buys electricity from generation companies (GenCos) and sells it to distribution companies (DisCos) at regulated tariffs. When tariffs are held below the cost of supply, the gap is covered by subsidy payments.
Tanimu Yakubu, Director-General of the Budget Office of the Federation, said President Bola Ahmed Tinubu, Nigeria’s president since 2023, directed that subsidy costs must be explicit, tracked and shared across tiers of government. “When tariffs are held below cost, a gap is created. That gap is a subsidy. And a subsidy is a bill,” Yakubu said. He said the Federal Government will stop treating electricity subsidies as an open-ended cost carried only by the centre and will use the existing electricity law to make it fully enforceable.
The MTEF-FSP projects outstanding debts in the Nigerian Electricity Supply Industry (NESI) could rise to about ₦6.5tn by the end of 2025, up from around ₦4tn earlier in the year.
Energy policy expert Habu Sadeik said the ₦1.2tn is designed as a first-line deduction from FAAC, similar to the Presidential Metering Initiative, which has carved out about ₦800bn over time for metering. He said states receive 26.72 per cent of the Main Pool and local governments receive 20.60 per cent; with projected 2026 FAAC revenue of about ₦41.06tn, the upfront deduction would reduce what is available for distribution.
Adetayo Adegbemle, Executive Director and Convener of PowerUp Nigeria, welcomed the idea as consistent with federalism, but said full details were still unclear. He said it would mainly apply to states that have not created their own electricity markets under Nigeria’s amended Electricity Act, while states with functional state electricity markets could be exempted.
The Ministry of Power, led by Minister Adebayo Adelabu, backed the proposal through his media aide, Bolaji Tunji, who said the Budget Office should clarify implementation but added, “we agree with him on this.” The Forum of State Commissioners of Power and Energy in Nigeria (FOCPEN) said it will study the plan; its chairman, Prince Eka Williams, a commissioner in Cross River State in southern Nigeria, said the forum will consult experts and announce its position later.
