Federal Government to Collaborate with States on Sharing Electricity Subsidy Expenses

The Federal Government has announced plans to share electricity subsidy costs with state and local governments from 2026, ending the practice of shouldering the burden alone.

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

Yakubu said President Bola Tinubu had directed that electricity subsidy costs be made transparent, tracked, and fairly distributed across all tiers of government, warning that the current system creates hidden liabilities and recurring challenges in 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,” he explained. He added that from 2026, the Federal Government would no longer treat electricity subsidies as an open-ended responsibility, especially where policy decisions and benefits are shared across governments.

The President has instructed that the existing legal framework for the electricity sector be used to ensure subsidy sharing is practical, transparent, and enforceable. “Subsidy costs must be explicit, tracked, and funded to prevent arrears, liquidity crises, or hidden liabilities,” Yakubu said.

He emphasized that the policy is intended to align incentives across government, not as a punishment. “When everyone carries a fair share of the cost, there is a greater incentive to support cost-reflective efficiency, protect vulnerable populations, and maintain a power market that functions effectively,” he added.

MDAs were directed to reflect subsidy-related costs clearly in their 2026 budget submissions and avoid pushing unfunded liabilities into the electricity market.

Yakubu also noted that the 2026 Budget marks a departure from rollover budgeting and fragmented project lists that have weakened execution and accountability. He described the budget as a “single-train” framework designed to consolidate commitments, improve prioritization, strengthen control, and reduce duplication.

The President has also directed a review of the Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable, with clearer fiscal anchors, defined escape clauses for genuine shocks, and stronger reporting on contingent liabilities.

Yakubu said the 2026 Budget will require that capital projects demonstrate readiness, sequencing, a financing strategy, and measurable outputs, emphasizing that fewer but well-funded projects will deliver greater impact. GIFMIS-BPS will serve as the central tool to restore budget credibility, ensuring transparency and traceability from submission to execution.

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