Power subsidy burden to be shared nationwide as FG unveils new 2026 framework

The Federal Government has announced a major shift in Nigeria’s electricity subsidy policy, revealing plans to distribute the cost of power subsidies across the federal, state and local governments beginning from 2026, in a move aimed at restoring stability and transparency in the electricity market.

The new direction was disclosed on Monday in Abuja by the Director-General of the Budget Office of the Federation, Tanimu Yakubu, 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 explained that President Bola Tinubu had approved a framework that ends the long-standing practice of the Federal Government single-handedly absorbing electricity subsidy costs, warning that such an approach had created hidden fiscal pressures and recurring liquidity problems within the power sector.

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

According to him, the President has directed that electricity subsidies must be made explicit, properly tracked and equitably shared across all tiers of government, especially where political decisions and benefits are jointly enjoyed.

“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,” Yakubu said.

He added that the existing legal framework governing the electricity sector would be activated to ensure that the new subsidy-sharing arrangement is transparent, practical and enforceable.

“This means subsidy costs must be explicit, tracked, and funded, so they do not return as arrears, liquidity crises, or hidden liabilities in the market,” he said. “If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed, and enforceable.”

Yakubu stressed that the policy shift was not intended as a punitive measure but as a way to align incentives and encourage efficiency across the power value chain.

“This is not punishment. It is alignment,” he said. “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.”

He urged MDAs to clearly capture subsidy-related obligations in their 2026 budget submissions, warning against the practice of transferring unfunded liabilities into the electricity market.

Beyond electricity subsidies, the Budget Office chief said the 2026 Budget would mark a decisive departure from rollover budgeting and fragmented project listings, which he said had undermined accountability and weakened implementation 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 approach as a “single-train” framework, Yakubu said it would improve prioritisation, enhance control 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.”

Yakubu also disclosed that President Tinubu had ordered a review of the Fiscal Responsibility framework to strengthen fiscal discipline rather than abandon it.

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

He said the review would introduce clearer fiscal anchors, better-defined escape clauses for genuine economic shocks, and a credible path back to compliance, supported by stronger reporting on contingent liabilities.

For MDAs, Yakubu noted that budget proposals would now face stricter scrutiny. “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.

He further announced that the 2026 Budget would deepen the transition from lengthy project lists to project financing, insisting that capital projects must be delivery-ready and, where necessary, finance-ready.

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

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

Yakubu described GIFMIS-BPS as critical to restoring confidence in 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.”

The workshop, he said, is designed to align MDAs with the new budget framework, improve compliance and strengthen the link between planning, financing and measurable outcomes in the 2026 fiscal year.

The policy shift comes against the backdrop of mounting financial pressures in the power sector. Reports indicate that the Federal Government incurred N1.98 trillion in electricity subsidy obligations between October 2024 and September 2025, even as it grapples with over N4 trillion in outstanding debts owed to power generation companies, according to quarterly reports released by the Nigerian Electricity Regulatory Commission (NERC).