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Abuja — The Federal Government has announced plans to end the practice of bearing electricity subsidy costs alone, unveiling a new framework that will distribute the burden across the federal, state, and local governments beginning in 2026.
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed this on Monday in Abuja during 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).
Tinubu orders transparent subsidy sharing
Yakubu said President Bola Tinubu had directed that electricity subsidy costs must be explicit, tracked, and fairly shared across all tiers of government, warning that the current arrangement creates hidden liabilities and recurring crises in Nigeria’s power market.
“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.”
According to him, 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.
“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,” he said.
Legal framework to enforce cost sharing
Yakubu explained that the President had directed the invocation of the existing electricity sector legal framework to ensure subsidy sharing is practical, transparent, and enforceable.
He said subsidy costs must be clearly funded to prevent them from reappearing as arrears, liquidity shortfalls, or hidden liabilities in the power market.
“If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed, and enforceable,” he added.
He stressed that the policy is not punitive but aimed at aligning incentives across government.
“This is not punishment. It is alignment,” Yakubu said.
“When everyone carries a fair share of the cost, everyone also has an incentive to support efficiency, targeted protection for the vulnerable, and a power market that actually delivers.”
MDAs were directed to clearly reflect subsidy-related costs in their 2026 budget submissions and avoid pushing unfunded liabilities into the electricity market.
2026 Budget to end rollover, fragmented projects
Beyond electricity subsidies, Yakubu said the 2026 Budget marks a decisive break from rollover budgeting and fragmented project lists, which he noted have weakened execution and accountability over the years.
“The 2026 Budget corrects this. It is built as one coherent implementation framework,” he said.
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.
“It allows the government to know, at any point, what it has committed to deliver.”
Fiscal rules to be strengthened, not abandoned
Yakubu also revealed that President Tinubu had ordered a review of Nigeria’s Fiscal Responsibility framework to make fiscal rules more dynamic and enforceable.
“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 said the review would introduce:
- Clearer fiscal anchors
- Well-defined escape clauses for genuine shocks
- A credible path back to compliance
- Stronger reporting on contingent liabilities
For MDAs, this means budget proposals will be assessed not just on spending needs, but on fiscal sustainability and measurable results.
Shift from long project lists to delivery-ready projects
Yakubu said the 2026 Budget would deepen the shift from long project lists to project financing, insisting that capital proposals must be delivery-ready and, where applicable, finance-ready.
“A long list of projects is not a development strategy,” he said.
“What citizens feel is delivery — completed roads, reliable power, functional schools, working hospitals.”
Projects submitted for funding must demonstrate readiness, sequencing, financing plans, clear timelines, and measurable outputs. He added that fewer but better-funded projects would deliver greater impact.
GIFMIS central to budget credibility
Yakubu described GIFMIS-BPS as central to restoring confidence in the budgeting process, 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 for the 2026 fiscal year.
Background
The development comes amid mounting pressure on public finances. The PUNCH earlier reported that the Federal Government incurred ₦1.98 trillion in electricity subsidy obligations between October 2024 and September 2025, even as it struggles to settle over ₦4 trillion owed to power generation companies.
The figures were contained in quarterly reports released by the Nigerian Electricity Regulatory Commission (NERC).
