FG to Share Electricity Subsidy Costs Across Federal, State, and Local Governments From 2026

FG to Share Electricity Subsidy Costs Across Federal, State, and Local Governments From 2026

The Federal Government has announced plans to end the practice of bearing electricity subsidy costs in Nigeria alone, unveiling a new framework that will distribute the financial burden across federal, state, and local governments starting from 2026.

The announcement was made on Monday in Abuja by the Director-General of the Budget Office of the Federation, Mr Tanimu Yakubu.

Announcement Made at 2026 Budget Preparation Workshop

Yakubu disclosed the policy shift during a training and sensitisation workshop for ministries, departments, and agencies (MDAs) on the 2026 post-budget preparation process.

The workshop focused on the use of the Government Integrated Financial Management Information System (GIFMIS) Budget Preparation Sub-System.

President Tinubu Orders Transparent Subsidy Accounting

According to Yakubu, President Bola Ahmed Tinubu has directed that electricity subsidy costs in Nigeria must be made explicit, properly tracked, and fairly shared across all tiers of government.

He warned that the current approach creates hidden liabilities and recurring crises in the power sector.

“If we want a stable power sector, we must pay for the choices we make,” Yakubu said. “When tariffs are held below cost, a gap is created. That gap is a subsidy. And a subsidy is a bill.”

FG to Stop Carrying Subsidy Burden Alone

Yakubu stated that from 2026, the Federal Government would no longer treat electricity subsidies as an open-ended obligation borne solely by the centre.

He noted that where policy decisions and political benefits are shared, the financial responsibility must also be shared.

“We will stop pretending that this bill can be left to the Federal Government alone,” he said.

Legal Framework to Enforce Subsidy Sharing

The Budget Office chief revealed that the President has instructed the use of existing electricity sector laws to ensure subsidy sharing is practical, transparent, and enforceable.

This approach is expected to prevent unpaid subsidies from returning as arrears, liquidity shortfalls, or hidden market liabilities.

“If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed, and enforceable,” Yakubu added.

Policy Aims to Align Incentives, Not Punish

Yakubu emphasized that the new policy is not a punitive measure but a way to align incentives across all levels of government.

“This is not punishment. It is alignment,” he said. “When everyone carries a fair share of the cost, everyone also has an incentive to support efficiency, targeted protection for the vulnerable, and a power market that works.”

MDAs Directed to Reflect Subsidy Costs in 2026 Budgets

He instructed MDAs to clearly reflect subsidy-related costs in their 2026 budget submissions and avoid shifting unfunded obligations into the electricity market.

This, he said, would improve accountability and reduce systemic risks in the power sector.

2026 Budget Marks End of Rollover Budgeting

Beyond electricity subsidy costs in Nigeria, Yakubu said the 2026 Budget represents a clear departure from rollover budgeting and fragmented project lists.

He noted that previous budgeting practices weakened execution, monitoring, and accountability.

“The 2026 Budget is built as one coherent implementation framework,” he said.

Introduction of the “Single-Train” Budget Framework

Yakubu described the new approach as a “single-train” framework designed to consolidate commitments into one visible delivery pipeline.

“One plan. One pipeline. One execution logic,” he said, explaining that the framework would improve prioritisation, control, and coordination across government.

Fiscal Responsibility Framework to Be Strengthened

The Budget Office chief also disclosed that President Tinubu has ordered a review of the Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable.

“Fiscal rules are the guardrails of government,” Yakubu said, warning that without them, spending becomes impulsive and debt unsustainable.

Stricter Assessment of MDA Spending Proposals

Under the revised framework, MDAs will be required to justify how proposed spending aligns with fiscal rules, sustainability goals, and measurable outcomes.

“You will not only be asked what you want to spend,” Yakubu said, “but how it fits the fiscal rules and what results it will deliver.”

Shift From Project Lists to Project Financing

Yakubu announced that the 2026 Budget would deepen the move away from long project lists toward project-based financing.

He stressed that capital projects must be delivery-ready, finance-ready where applicable, and backed by clear timelines and outputs.

“A long list of projects is not a development strategy,” he said.

GIFMIS-BPS to Drive Budget Credibility

He described the GIFMIS Budget Preparation Sub-System as central to restoring credibility to the budgeting process, improving transparency and traceability from proposal to execution.

According to him, it serves as the operating system for credible budgeting.

Shared Responsibility for Delivering the Renewed Hope Agenda

Yakubu concluded by stressing that while the Budget Office will coordinate standards, delivery depends on all MDAs.

“Nigerians expect results,” he said. “Through a credible 2026 Budget, we must deliver.”

Background: Rising Electricity Subsidy Obligations

The development comes amid rising subsidy obligations in the power sector.

According to earlier reports, the Federal Government incurred N1.98 trillion in electricity subsidy costs in Nigeria between October 2024 and September 2025, while also struggling to settle over N4 trillion owed to power generation companies.

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