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Nigeria’s Federal Government plans to stop shouldering electricity subsidy costs alone. Instead, the burden will be shared across federal, state, and local governments starting in 2026.
This move has triggered disagreements in the power sector. While distribution companies support the plan, generation companies challenge the very existence of a subsidy.
Government Plans FAAC Deductions
Reports show the government intends to deduct subsidy payments directly from allocations shared through the Federation Account Allocation Committee (FAAC). The move could see as much as N3.6tn removed from the account over 2026–2028.
The Director-General of the Budget Office, Tanimu Yakubu, said the directive follows President Bola Tinubu’s order to stop hidden liabilities in the electricity market and ensure transparent funding of subsidy costs.
GenCos Reject Subsidy Claims
Generation companies, led by the Association of Power Generation Companies (APGC), argue that the idea of an electricity subsidy is unproven.
APGC CEO Joy Ogaji questioned whether the government has documented evidence of a subsidy. She said GenCos have been effectively funding the sector themselves for more than a decade due to unpaid shortfalls.
Ogaji added that as of December 2025, the Federal Government owed GenCos N6.4tn through the Nigeria Electricity Trading Plc. She warned that extending the subsidy assumption to states and local governments could worsen the sector’s liquidity crisis.
DisCos Support Policy
Meanwhile, the Association of Nigerian Electricity Distributors (ANED) supports the plan. CEO Sunday Oduntan said spreading the burden could bring fairness and structure to the system.
He noted that deductions could be made at source from FAAC allocations. While states’ capacities to absorb the costs may vary, he described the policy as practical and fair.
Oduntan also suggested targeted subsidies for vulnerable customers, rather than universal subsidies, to ensure effectiveness.
Sector Outlook
Without clear budgetary provisions or formal recognition of shortfalls, debts in the power sector are expected to rise. GenCos stress the need for proper funding to prevent further financial strain.
Distribution companies, however, believe the new FAAC deduction mechanism could stabilize the sector and improve transparency.
