Nigerian Govt To Share Electricity Subsidy Burden With States, LGs

The Federal Government has announced plans to end its sole responsibility for electricity subsidies, unveiling a new framework that will see the costs shared among the federal, state, and local governments starting in 2026.

The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed this on Monday in Abuja during a training and sensitisation workshop for ministries, departments and agencies, MDAs, on the 2026 post-budget preparation process, conducted using the Government Integrated Financial Management Information System, GIFMIS, Budget Preparation Sub-System.

Yakubu said President Bola Tinubu had directed that electricity subsidies be clearly identified, properly monitored and equitably distributed across all tiers of government, warning that the existing arrangement had created hidden liabilities and repeated crises within the power sector.

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

He explained that from 2026, electricity subsidies would no longer be treated as an unlimited federal responsibility, particularly where policy decisions and political benefits are jointly shared by multiple levels of government.

“In 2026, we will stop pretending that this bill can be left to the Federal Government alone, especially where the policy choice or the political benefit is shared across tiers of government,” he said.

According to the Budget Office chief, the President has instructed that existing laws governing the electricity sector be fully applied to ensure that subsidy-sharing arrangements are transparent, practical and enforceable.

“This means subsidy costs must be explicit, tracked and funded, so they do not resurface 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 said.

He stressed that the policy was not punitive but designed to align incentives across government and promote efficiency within the power market.

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

Yakubu urged MDAs to clearly reflect subsidy-related obligations in their 2026 budget submissions and avoid transferring unfunded liabilities into the electricity value chain.

Beyond electricity subsidies, he said the 2026 Budget would mark a decisive shift away from rollover budgeting and fragmented project listings, which he noted had weakened implementation and accountability over the years.

“The 2026 Budget corrects this. It is built as one coherent implementation framework,” he said. “The approach is to consolidate commitments into a single, visible pipeline and manage them as a disciplined programme of delivery.”

Describing the model as a “single-train” framework, Yakubu said it would enhance prioritisation, strengthen control mechanisms and eliminate duplication across government.

“One plan. One pipeline. One execution logic,” he said. “It allows the government to know, at any point, what we have committed to deliver.”

He also disclosed that President Tinubu had ordered a review of the Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable rather than discarding them entirely.

“Fiscal rules are the guardrails of the government,” Yakubu said. “Without guardrails, spending becomes impulsive, debt becomes casual, and the budget becomes a statement of intent rather than a tool of delivery.”

According to him, the review will introduce clearer fiscal anchors, better-defined escape clauses for genuine shocks, and a credible return-to-compliance pathway, alongside stronger reporting on contingent liabilities.

For MDAs, he said the changes would significantly alter how proposals are evaluated.

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

Yakubu also revealed that the 2026 Budget would deepen the transition from long project lists to structured project financing, insisting that capital proposals must be both delivery-ready and, where applicable, finance-ready.

“A long list of projects is not a development strategy,” he said. “What citizens feel is delivery, completed roads, reliable power, functional schools and working hospitals.”

He explained that projects submitted for funding must demonstrate readiness, clear sequencing, defined financing strategies, measurable outputs and realistic timelines, noting that fewer but well-funded projects would yield greater impact.

Yakubu described the GIFMIS Budget Preparation Sub-System as central to restoring credibility to the budgeting process, calling it “the operating system for credible budgeting” that enhances transparency and traceability from submission to execution.

“The success of the Renewed Hope Agenda is shared,” he said. “The Budget Office will coordinate and enforce standards, but delivery depends on every MDA. Nigerians expect results, and through a credible 2026 Budget, we must deliver.”