FG to Share Electricity Subsidy Costs with States from 2026

The Federal Government has announced plans to stop bearing electricity subsidy costs alone, unveiling a framework that will distribute the burden across federal, state, and local governments beginning in 2026.

Director-General of the Budget Office, Dr. Tanimu Yakubu, disclosed this during a sensitisation workshop in Abuja for ministries, departments, and agencies on the 2026 post-budget preparation process. He explained that President Bola Tinubu directed that subsidy costs must be made explicit, tracked, and fairly shared, warning that the current approach creates hidden liabilities and recurring crises in the power sector.

Yakubu stressed that subsidies represent real bills that must be accounted for. “If tariffs are held below cost, a gap is created. That gap is a subsidy. And a subsidy is a bill,” he said. He added that from 2026, affordability interventions chosen by any tier of government must come with clear, enforceable funding responsibilities.

The new policy, he noted, is not punitive but designed to align incentives across government, ensuring efficiency, targeted protection for vulnerable groups, and a more stable electricity market. MDAs were instructed to reflect subsidy-related costs clearly in their 2026 budget submissions to avoid unfunded liabilities.

Beyond power subsidies, Yakubu said the 2026 Budget marks a shift from fragmented project lists to a consolidated “single-train” framework that prioritises delivery-ready projects with clear financing strategies and measurable outcomes. He emphasised that fewer but better-funded projects will deliver greater impact.

He also revealed that the President has ordered a review of the Fiscal Responsibility framework to strengthen fiscal rules, introduce clearer anchors, and ensure compliance. Yakubu described fiscal rules as “guardrails” that prevent impulsive spending and casual debt accumulation.

The Budget Office chief highlighted the role of the Government Integrated Financial Management Information System (GIFMIS-BPS) in restoring budget credibility, saying it will improve transparency and traceability from submission to execution.

The announcement comes as Nigeria struggles with over ₦4 trillion in debts owed to power generation companies and ₦1.98 trillion in electricity subsidy obligations incurred between October 2024 and September 2025, according to NERC reports.