The Federal Government has announced plans to end the practice of bearing electricity subsidy costs alone, introducing a framework that will distribute the financial burden across federal, state, and local governments from 2026.
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed this on Monday in Abuja during a sensitisation workshop for ministries, departments, and agencies (MDAs) on the 2026 budget preparation process using the Government Integrated Financial Management Information System Budget Preparation Sub-System (GIFMIS-BPS).
Yakubu said President Bola Tinubu had directed that electricity subsidies be made explicit, properly tracked, and fairly shared among the three tiers of government, noting that the current arrangement creates hidden liabilities and recurring liquidity challenges 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, the difference becomes a subsidy, and a subsidy is a bill.”
According to him, from 2026, the Federal Government will no longer treat electricity subsidies as an open-ended obligation borne solely by the centre, especially where policy decisions and political benefits are shared.
He added that the President had ordered the use of existing electricity sector laws to ensure subsidy-sharing arrangements are practical, transparent, and enforceable.
“This means subsidy costs must be clearly identified, tracked, and funded so they do not return as arrears, liquidity gaps, or hidden liabilities,” Yakubu said. “Where any tier of government chooses affordability interventions, the funding responsibility must be clearly defined.”
Yakubu stressed that the policy was not punitive but aimed at aligning incentives across government and promoting efficiency in the power sector.
“This is not punishment; it is alignment,” he said. “When everyone bears a fair share of the cost, there is greater incentive to support efficiency, protect vulnerable consumers, and build a power market that delivers reliable supply.”
He urged MDAs to reflect subsidy-related costs clearly in their 2026 budget submissions and avoid pushing unfunded obligations into the electricity market.
Beyond electricity subsidies, Yakubu said the 2026 Budget would mark a shift away from rollover budgeting and fragmented project lists, describing the new approach as a single, coherent implementation framework.
“The 2026 Budget is built around one visible pipeline of commitments,” he said. “One plan, one pipeline, one execution logic.”
He also revealed that President Tinubu had directed a review of the Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable, including clearer fiscal anchors and better-defined escape clauses for economic shocks.
Yakubu added that the 2026 Budget would further prioritise project financing over long project lists, insisting that capital projects must be delivery-ready, well-sequenced, and backed by clear financing strategies.
“A long list of projects is not a development strategy,” he said. “What citizens experience is delivery, completed roads, reliable power, functional schools, and working hospitals.”
The Budget Office chief described GIFMIS-BPS as central to restoring budget credibility by improving transparency and traceability from budget submission to execution.
The workshop aims to align MDAs with new budget standards, strengthen compliance, and improve the link between planning, financing, and results in the 2026 fiscal year.
Data from the Nigerian Electricity Regulatory Commission show that the Federal Government incurred about ₦1.98 trillion in electricity subsidy obligations between October 2024 and September 2025, amid ongoing challenges in settling debts owed to power generation companies.
