The Federal Government has announced plans to stop shouldering electricity subsidy costs alone, unveiling a new framework that will distribute the financial responsibility among federal, state, and local governments beginning in 2026.
The move was disclosed in Abuja by the Director-General of the Budget Office of the Federation, Tanimu Yakubu, during a capacity-building workshop for ministries, departments and agencies on preparations for the 2026 budget cycle.
Yakubu said President Bola Tinubu has directed that electricity subsidies must no longer remain hidden or loosely managed, stressing that all tiers of government must openly account for and fund the cost of keeping electricity tariffs below market levels.
According to him, subsidies arise when electricity prices are set below the actual cost of supply, creating financial gaps that eventually become debts within the power sector. He warned that continuing to leave such costs solely to the Federal Government has contributed to persistent liquidity challenges in the electricity market.
From 2026, Yakubu said the Federal Government would no longer accept open-ended subsidy obligations, especially in cases where policy decisions and political gains are shared across different levels of government. Instead, subsidy costs will be clearly defined, tracked, and jointly funded to prevent the accumulation of arrears.
He explained that existing electricity sector laws would be applied to ensure the subsidy-sharing arrangement is transparent, practical, and enforceable. Any government tier that opts for affordability measures, he said, must also accept clear funding responsibilities tied to those decisions.
Yakubu noted that the new policy is not meant to penalise any level of government but to encourage collective responsibility and efficiency. He said shared financial responsibility would promote support for cost-reflective pricing, targeted support for vulnerable consumers, and a more sustainable power market.
As part of the changes, MDAs have been instructed to clearly capture subsidy-related expenses in their 2026 budget proposals, rather than pushing unfunded obligations into the electricity value chain.
Beyond electricity subsidies, Yakubu said the 2026 Budget represents a shift away from fragmented budgeting practices. He explained that the new budget framework would consolidate government commitments into a single implementation plan, aimed at improving coordination, accountability, and delivery.
He described the approach as a “single-train” framework that prioritises execution over lengthy project lists, allowing government to better track what it has committed to deliver at any point in time.
The Budget Office chief also revealed that the fiscal responsibility framework is being reviewed to strengthen enforcement and introduce clearer fiscal limits, defined escape clauses for economic shocks, and improved reporting on contingent liabilities.
He added that MDAs would now be assessed not only on how much they intend to spend, but on how their proposals align with fiscal rules, sustainability goals, and measurable outcomes.
Yakubu further said that the 2026 Budget would prioritise fewer but well-prepared capital projects, insisting that proposals must be delivery-ready, properly sequenced, and backed by clear financing plans.
The workshop, he said, is aimed at aligning MDAs with the new budgeting standards and strengthening the link between planning, financing, and results.
Recent data from the Nigerian Electricity Regulatory Commission show that the Federal Government incurred nearly ₦2 trillion in electricity subsidy obligations between October 2024 and September 2025, amid ongoing challenges in settling debts owed to power generation companies.
