FG to share electricity subsidy costs with states, LGs from 2026

The Federal Government has unveiled plans to end the practice of solely bearing the cost of electricity subsidies, announcing a new framework that will distribute the financial burden among federal, state and local governments beginning in 2026.

Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed this in Abuja during a training and sensitisation workshop for ministries, departments and agencies (MDAs) on the 2026 post-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 funded across all tiers of government to prevent hidden liabilities and recurring liquidity problems in the power sector.

He explained that keeping electricity tariffs below cost creates funding gaps that translate into subsidies, stressing that such obligations must no longer be treated as open-ended commitments of the Federal Government alone.

According to him, the existing legal framework in the electricity sector will be applied to ensure that subsidy-sharing arrangements are transparent, practical and enforceable. Any tier of government that opts for affordability measures, he added, must clearly define and fund its share of the costs.

Yakubu described the move as an alignment strategy rather than a punitive measure, noting that shared responsibility would encourage efficiency, cost-reflective tariffs and targeted support for vulnerable consumers.

He urged MDAs to clearly reflect subsidy-related expenses in their 2026 budget proposals and avoid passing unfunded liabilities into the electricity market.

Beyond the subsidy reforms, Yakubu said the 2026 Budget would mark a departure from what he called fragmented and rollover budgeting. Instead, the government would adopt a consolidated implementation framework that prioritises fewer, well-funded and delivery-ready projects.

He said the new approach, described as a “single-train” framework, would enhance prioritisation, strengthen accountability and reduce duplication, while ensuring that projects have clear financing plans, timelines and measurable outcomes.

Yakubu also revealed that the President had ordered a review of the Fiscal Responsibility framework to make fiscal rules more flexible, enforceable and responsive to economic shocks, with improved reporting on liabilities.

He identified GIFMIS-BPS as central to improving transparency and credibility in budgeting, enabling better tracking of spending from planning to execution.

The workshop, he said, is aimed at aligning MDAs with the new budget structure and strengthening the link between planning, financing and results ahead of the 2026 fiscal year.

The reforms come amid mounting pressures in the power sector. Data from the Nigerian Electricity Regulatory Commission show the Federal Government recorded about N1.98 trillion in electricity subsidy obligations between October 2024 and September 2025, alongside more than N4 trillion owed to power generation companies.