FG PROPOSES N3.6TN FAAC DEDUCTION TO FUND ELECTRICITY SUBSIDIES ACROSS 2026–2028
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By Aishat Momoh. O.
The Federal Government has proposed a N3.6 trillion deduction from the Federation Account to fund electricity subsidies over 2026, 2027, and 2028, a move aimed at sharing the financial burden across federal, state, and local governments. The proposal was detailed in the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF-FSP) for 2026–2028.
According to the MTEF, N1.2 trillion is earmarked annually for electricity subsidies, to be deducted directly from the gross Federation Account before revenue is distributed to states and local governments. The measure is intended to stabilize the power sector, improve fiscal transparency, and prevent hidden liabilities from accumulating within the Nigerian Electricity Supply Industry (NESI).
Budget Office Director-General, Tanimu Yakubu, explained that the move aligns with President Bola Tinubu’s directive to make subsidy obligations explicit, tracked, and fairly shared among all tiers of government. “In 2026, we will stop pretending that this bill can be left to the Federal Government alone, especially where policy choices or political benefits are shared,” he said.
Energy policy expert, Habu Sadeik, noted that the upfront FAAC deduction would reduce distributable revenue for states and local governments, but would make electricity subsidy payments predictable and sustainably funded. Previously, the Federal Government alone bore the full cost, with budget allocations falling short of sector debt, projected to reach N6.5 trillion by the end of 2025.
Advocates of the framework, including the Executive Director of PowerUp Nigeria, Adetayo Adegbemle, described the proposal as consistent with federalism, encouraging states and local governments to audit their customer bases and contribute to subsidy payments, while improving accountability in the sector.
The Ministry of Power has expressed support for the framework, emphasizing alignment with the initiative’s objectives. State power commissioners, however, said they would review the proposal carefully before issuing formal positions.
Under the new arrangement, the N1.2 trillion deduction will be prioritized from the gross FAAC revenue, affecting allocations to states (26.72%) and local governments (20.60%). The move may compel governors to reassess budgets for critical sectors such as education, healthcare, and infrastructure.
Experts and stakeholders say the proposal represents a strategic effort to address mounting electricity subsidy debt, enhance transparency, and share fiscal responsibility across all tiers of government, while maintaining stability in the nation’s power sector.
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