The Federal Government has announced plans to discontinue the practice of solely bearing electricity subsidy costs, unveiling a framework that will distribute the financial responsibility among the federal, state, and local governments beginning in 2026.
This 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 on the 2026 post-budget preparation process using the Government Integrated Financial Management Information System Budget Preparation Sub-System.
Yakubu explained that President Bola Tinubu had directed that electricity subsidy expenses be clearly identified, monitored, and equitably shared across all tiers of government, cautioning that the existing system generates hidden obligations and repeated crises 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.”
He stated that from 2026, the Federal Government would no longer regard electricity subsidies as an unlimited obligation to be carried only by the centre, particularly in situations where policy decisions and political gains are jointly shared.
“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.
According to him, the President has ordered that the existing legal framework governing the electricity sector be applied to ensure that subsidy sharing is workable, transparent, 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 emphasised that the policy was not intended as a punitive measure but as a way to align incentives across all levels of government and improve 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.”
He advised MDAs to clearly reflect subsidy-related expenses in their 2026 budget proposals and to refrain from transferring unfunded liabilities into the electricity market.
Beyond electricity subsidies, Yakubu noted that the 2026 Budget represents a decisive shift away from rollover budgeting and disjointed project listings, which he said have undermined implementation and accountability over time.
“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 strategy as a “single-train” framework, saying it would enhance prioritisation, strengthen oversight, and minimise 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 the President had ordered a review of the Fiscal Responsibility framework to make fiscal rules more flexible and enforceable, rather than discarding them altogether.
“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 explained that the review would introduce clearer fiscal anchors, more precisely defined escape clauses for genuine economic shocks, and a credible path back to compliance, alongside stronger reporting of contingent liabilities.
For MDAs, he said this would alter how budget 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.
The Budget Office chief further stated that the 2026 Budget would deepen the transition from lengthy project lists to a project financing approach, stressing that capital projects must be ready for delivery and, where applicable, ready for financing.
“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 added that projects submitted for funding in 2026 must demonstrate readiness, proper sequencing, a clear financing plan, and measurable outputs with defined timelines, noting that fewer, well-funded projects would have 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 through 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 designed to align MDAs with updated budget requirements, improve compliance, and strengthen the connection between planning, financing, and outcomes in the 2026 fiscal year.
Earlier reports indicated that as the Federal Government struggles to clear over N4tn owed to power generation companies, it accumulated electricity subsidy obligations totaling N1.98tn within a 12-month period from October 2024 to September 2025.
These figures were contained in quarterly reports issued by the Nigerian Electricity Regulatory Commission.
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