The Federal Government has announced plans to end the long-standing practice of shouldering electricity subsidy costs alone, unveiling a framework that will distribute the financial burden across the federal, state and local governments from 2026.
The Director-General of the Budget Office of the Federation, Mr Tanimu Yakubu, disclosed this on Monday in Abuja at 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 (GIFMIS) Budget Preparation Sub-System.
Yakubu said President Bola Tinubu had directed that electricity subsidies be made explicit, transparently tracked and fairly shared among the three tiers of government, warning that the existing approach had created hidden liabilities and recurring liquidity crises in the power sector.
“If we want a stable power sector, we must pay for the choices we make,” Yakubu said. “When tariffs are held below cost, a gap is created. That gap is a subsidy, and a subsidy is a bill.”
He stressed that from 2026, the Federal Government would no longer treat electricity subsidies as an open-ended obligation borne solely by the centre, particularly where policy decisions and political benefits are jointly enjoyed across tiers 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,” he said.
According to him, the President has instructed that the relevant legal framework in the electricity sector be activated to ensure that subsidy-sharing arrangements are practical, transparent and enforceable.
“This means subsidy costs must be explicit, tracked and funded, so they do not resurface as arrears, liquidity shortfalls or hidden liabilities in the market,” Yakubu explained. “If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed and enforceable.”
He clarified that the policy was not intended as a punitive measure but as a mechanism to align incentives across government and promote efficiency in the power sector.
“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.”
Yakubu urged MDAs to clearly reflect subsidy-related costs in their 2026 budget submissions and avoid pushing unfunded liabilities into the electricity market.
Beyond electricity subsidies, he said the 2026 Budget would mark a decisive departure from rollover budgeting and fragmented project lists, which he noted had undermined execution 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.”
He described the new approach as a “single-train” framework designed to improve prioritisation, strengthen control and reduce duplication across government. “One plan. One pipeline. One execution logic,” he said, adding that it would enable government to track commitments and delivery in real time.
Yakubu also revealed that President Tinubu had ordered a review of the Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable, rather than abandoning them.
“Fiscal rules are the guardrails of 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 explained that the review would introduce clearer fiscal anchors, well-defined escape clauses for genuine economic shocks and a credible path back to compliance, alongside stronger reporting on contingent liabilities.
For MDAs, Yakubu said this would change 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.
He further disclosed that the 2026 Budget would deepen the shift from long project lists to project financing, insisting that capital proposals must be delivery-ready and, where appropriate, 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 and working hospitals.”
He added that projects submitted for funding in 2026 must demonstrate readiness, proper sequencing, a clear financing strategy, and measurable outputs and timelines, noting that fewer but better-funded projects would yield greater impact.
Yakubu described the GIFMIS-BPS as central to restoring budget credibility, 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 is aimed at aligning MDAs with new budget expectations, improving compliance and strengthening the link between planning, financing and results in the 2026 fiscal year.
Meanwhile, recent data highlight the scale of the challenge facing the power sector. The Federal Government reportedly incurred electricity subsidy obligations of N1.98 trillion between October 2024 and September 2025, amid efforts to settle over N4 trillion owed to power generation companies, according to quarterly reports released by the Nigerian Electricity Regulatory Commission.
