KEY POINTS
- From 2026, electricity subsidy costs will be shared across federal, state, and local governments to reduce hidden liabilities and recurring crises in the power sector.
- The policy enforces transparency, accountability, and explicit funding responsibilities for all tiers of government while aligning incentives to support efficiency.
- Broader 2026 Budget reforms introduce a “single-train” framework, requiring delivery-ready projects, clear financing strategies, and adherence to fiscal rules.
The Federal Government has announced a major shift in electricity subsidy policy, moving to distribute the financial burden across federal, state, and local governments starting in 2026. The announcement was made by Tanimu Yakubu, Director-General of the Budget Office of the Federation, during a workshop for ministries, departments, and agencies in Abuja.
Yakubu explained that President Bola Tinubu directed electricity subsidy costs be made explicit, tracked, and shared fairly across all tiers of government. The move aims to prevent hidden liabilities and recurring crises in the power sector, which have previously undermined stability.
“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.”
Clear Guidelines and Accountability Measures
The policy will ensure that subsidy costs are explicit, traceable, and properly funded. Yakubu emphasized that the change is not punitive but seeks to align incentives across governments, improve efficiency, and support cost-reflective pricing while protecting vulnerable consumers.
The President has instructed that the existing legal framework for the electricity sector be applied to enforce practical and transparent subsidy sharing. State and local governments will now have clearly defined responsibilities if they pursue affordability interventions.
“This is not punishment. It is alignment,” Yakubu said. “When everyone carries a fair share of the cost, everyone has an incentive to support efficiency and a power market that can deliver.”
The announcement is part of broader reforms under the 2026 Budget, designed to improve execution, accountability, and fiscal discipline. Yakubu described the new approach as a “single-train” framework to consolidate government commitments into a coherent implementation plan.
Capital projects must now be delivery-ready and, where appropriate, finance-ready. Ministries, departments, and agencies are expected to provide clear timelines, financing strategies, and measurable outcomes for all projects.
Yakubu also revealed plans to review the Fiscal Responsibility framework, strengthening fiscal rules, reporting on contingent liabilities, and ensuring budget proposals align with sustainability and measurable results.
