Power Sector Reform: FG to Stop Bearing Electricity Subsidy Alone From 2026
- The federal government plans to share electricity subsidy costs with states and local governments from 2026
- The policy follows a directive by President Bola Tinubu to make subsidies transparent and enforceable
- MDAs have been instructed to reflect subsidy-related costs clearly in their 2026 budget proposals
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology and macroeconomic trends in Nigeria.
The federal government has announced plans to stop bearing electricity subsidy costs alone, unveiling a framework that will require federal, state, and local governments to share the financial burden from 2026.
Source: UGC
The Director-General of the Budget Office of the Federation, 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 Budget Preparation Sub-System (GIFMIS-BPS).
According to Yakubu, President Bola Tinubu has directed that electricity subsidies should be made explicit, properly tracked, and fairly distributed across the three tiers of government, warning that the current arrangement creates hidden liabilities and repeated crises in the power sector.
How electricity subsidy is funded
He explained that when electricity tariffs are set below the actual cost of supply, the resulting gap represents a subsidy that must be funded, adding that leaving such costs unaccounted for has contributed to liquidity challenges in the electricity market.
Yakubu said that from 2026, electricity subsidies would no longer be treated as an open-ended obligation of the Federal Government, especially where policy decisions and political benefits are shared by other tiers of government.
He noted that the President had instructed relevant authorities to rely on existing electricity sector laws to ensure that subsidy-sharing arrangements are transparent, practical, and enforceable.
New subsidy payment formula
According to him, the new approach is not intended as a punitive measure but as a way to align incentives across government, encourage efficiency, and support cost-reflective pricing while protecting vulnerable consumers.
The Budget Office chief also directed MDAs to clearly reflect subsidy-related costs in their 2026 budget submissions, cautioning against shifting unfunded liabilities into the electricity market.
Beyond power subsidies, Yakubu said the 2026 Budget would mark a departure from rollover budgeting and fragmented project listings, which he said had weakened accountability and execution over time.
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He explained that the new budget framework would consolidate government commitments into a single implementation pipeline, a structure he described as a “single-train” approach aimed at improving prioritisation, reducing duplication, and strengthening control.
Source: Getty Images
Tinubu orders review of fiscal responsibility framework
Yakubu further 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 entirely.
He said the review would introduce clearer fiscal anchors, defined escape clauses for genuine economic shocks, and stronger reporting on contingent liabilities, alongside a credible path back to compliance.
The Budget Office director-general added that MDAs would now be assessed not only on proposed spending but also on how their plans align with fiscal rules, sustainability goals, and measurable outcomes.
He also stated that the 2026 Budget would deepen the shift from lengthy project lists to project financing, insisting that capital projects must be delivery-ready, properly sequenced, and supported by clear financing plans.
Yakubu described GIFMIS-BPS as central to restoring budget credibility, noting that the system improves transparency and traceability from budget submission to execution.
He said the workshop was designed to align MDAs with the new budget expectations and strengthen the link between planning, financing, and results in the 2026 fiscal year.
FG raises N501bn bonds to clear electricity debt
Legit.ng earlier reported that the federal government raised N501 billion through bonds to address historic debts in the electricity sector.
The bond, issued under the Presidential Power Sector Debt Reduction Programme, achieved full subscription and marks the most concrete step yet by the Bola Tinubu administration to resolve payment arrears that have crippled electricity generation for more than a decade.
The settlement programme could improve electricity service delivery for over 12 million customers
Source: Legit.ng
