Nigeria electricity subsidy reform from 2026 spreads costs across federal, state, and local governments to ensure transparency and efficiency in power sector

The Federal Government has announced a framework to distribute the Nigeria electricity subsidy reform burden across federal, state, and local governments starting in 2026, ending the practice of carrying subsidy costs alone.

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Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed the policy during a training and sensitisation workshop in Abuja for ministries, departments, and agencies on the 2026 post-budget preparation process using the Government Integrated Financial Management Information System Budget Preparation Sub-System (GIFMIS-BPS).

Yakubu said President Bola Tinubu directed that electricity subsidy costs be explicit, tracked, and shared fairly across tiers of government, warning that the current approach creates hidden liabilities and recurring crises in the power market.

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

From 2026, the Federal Government will no longer treat electricity subsidies as an open-ended obligation borne solely by the centre, particularly where policy decisions and political benefits are shared.

Yakubu emphasised that the subsidy framework would be practical, transparent, and enforceable under the existing legal structure.

“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.”

MDAs were instructed to reflect subsidy-related costs clearly in their 2026 budget submissions to prevent unfunded liabilities from destabilising the electricity market.

Yakubu said the 2026 Budget also breaks from rollover budgeting and fragmented project lists, consolidating commitments into a single, coherent implementation framework — a “single-train” approach to improve prioritisation, control, and accountability.

He revealed that President Tinubu had directed a review of the Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable. “Fiscal rules are the guardrails of the government.

Without guardrails, spending becomes impulsive, debt becomes casual, and the budget becomes a statement of intent rather than a tool of delivery,” Yakubu said.

The Budget Office chief stressed that capital proposals for 2026 must be delivery-ready and, where applicable, finance-ready, with measurable outputs, clear timelines, and sequencing. Fewer, well-funded projects would deliver more tangible results for citizens.

GIFMIS-BPS was described as central to restoring budget credibility, improving transparency and traceability from submission to execution.

“The success of the Renewed Hope Agenda is shared. 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,” Yakubu said.

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The announcement comes as the Federal Government struggles to pay over N4 trillion owed to power generation companies, having incurred N1.98 trillion in electricity subsidy obligations from October 2024 to September 2025, according to quarterly reports by the Nigerian Electricity Regulatory Commission.