The Federal Government has announced a new framework that will end the practice of bearing electricity subsidy costs alone as the burden will be shared among the federal state and local governments from 2026.
The Director General of the Budget Office of the Federation Tanimu Yakubu disclosed this in Abuja 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.
Yakubu said President Bola Tinubu has directed that electricity subsidy costs must be made explicit properly tracked and fairly distributed across all tiers of government. He warned that the current system creates hidden liabilities and recurring crises within the power sector.
According to him whenever electricity tariffs are held below the cost of supply a funding gap is created and that gap represents a subsidy which must be paid for. He stressed that from 2026 electricity subsidies would no longer be treated as an open ended obligation carried solely by the Federal Government especially where policy decisions and political benefits are shared.
Yakubu explained that the President has instructed that existing electricity sector laws be applied to ensure subsidy sharing is practical transparent and enforceable. He noted that any affordability intervention chosen by any tier of government must come with clear funding responsibilities to prevent arrears liquidity challenges and market instability.
He described the policy as an alignment of incentives rather than punishment saying that shared responsibility would encourage efficiency targeted protection for vulnerable citizens and a more functional power market.
The Budget Office chief also revealed that the 2026 Budget would depart from rollover budgeting and fragmented project lists. Instead it will operate as a single coherent implementation framework aimed at improving execution accountability and prioritisation.
Yakubu added that fiscal rules would be reviewed and strengthened to improve sustainability while capital projects submitted for funding must be delivery ready with clear financing plans timelines and measurable outcomes.
He said the reforms are designed to restore budget credibility and ensure that Nigerians experience real development through reliable power functional infrastructure and effective public services.
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