The Federal Government of Nigeria will begin sharing the financial burden of electricity subsidies with state and local governments starting in 2026, marking a major shift in fiscal policy for the power sector. This directive, announced by Budget Office Director-General Tanimu Yakubu, aims to make subsidy costs explicit, transparent, and enforceable, ensuring no level of government carries hidden obligations.
Okay News reports that President Bola Tinubu has ordered all ministries to use existing electricity laws to establish a clear cost-sharing framework for the 2026 budget. The policy is a strategic move to align financial responsibility with political benefits, as subsidy costs arise when tariffs are kept below the true cost of supply, with Yakubu stating, “This is not punishment, it is alignment.”
The reform urgently addresses a severe liquidity crisis where electricity generating companies are owed over ₦4 trillion, and the government intends to finance support for vulnerable consumers through a targeted fund, moving away from universal subsidies. This change is enabled by the Electricity Act 2023, which empowers states to participate in the power sector, with over 18 states already setting up their own regulatory agencies for this purpose.
Beyond electricity, President Tinubu has ordered a strict review of all 2026 budget projects, demanding that only ready-to-implement initiatives with clear financing are proposed, with Yakubu criticizing long lists of unfinished projects as detrimental to national progress. The success of this reform hinges on transparent agreements between all levels of government, requiring meticulous tracking of subsidy obligations to prevent new debts from crippling the power sector and to stabilize Nigeria’s electricity market.
