The Federal Government has unveiled plans to end its sole responsibility for electricity subsidy payments, introducing a cost-sharing arrangement that will involve federal, state, and local governments from 2026
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, announced the move 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 (GIFMIS).
Yakubu explained that President Bola Tinubu had directed that electricity subsidies be clearly identified, monitored, and fairly distributed across all tiers of government, warning that the existing system masks liabilities and repeatedly destabilises the power sector.
He noted that keeping tariffs below the actual cost of supply inevitably creates a funding gap, which must be recognised as a subsidy. “A tariff gap is not invisible. It is a bill, and that bill must be paid if the power sector is to remain stable,” he said.
According to him, from 2026, the Federal Government will no longer indefinitely absorb electricity subsidy costs, particularly where policy decisions and political gains are shared among different levels of government.
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Yakubu added that the President had ordered the use of existing electricity-sector laws to ensure the new subsidy-sharing framework is workable, transparent, and enforceable.
Under the arrangement, subsidy expenses will be made explicit, properly funded, and closely tracked to prevent the re-emergence of arrears, liquidity shortfalls, or hidden obligations within the electricity market. He stressed that where any tier of government opts for affordability measures, the financial responsibilities must be clearly defined and agreed upon.
The Budget Office chief clarified that the policy was not intended as a punitive measure but as a way to align incentives and improve efficiency across the power sector. He said shared financial responsibility would encourage cost-reflective operations, targeted support for vulnerable consumers, and a more sustainable electricity market.
Yakubu also urged MDAs to fully account for subsidy-related costs in their 2026 budget proposals, cautioning against shifting unfunded obligations into the power sector.
