Federal Government To Divide Electricity Subsidy Costs With States And Local Governments
By Musiliu Opeyemi
In a significant shift in its approach to the power sector, the Federal Government has announced plans to share electricity subsidy costs with state and local governments beginning in 2026. This decision marks the end of the Federal Government’s long-standing role as the sole bearer of the financial burden associated with power subsidies.
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed this development during a training and sensitization workshop for Ministries, Departments, and Agencies (MDAs) in Abuja on Monday, February 2, 2026. The workshop, focusing on the post-budget preparation process for 2026, utilized the Government Integrated Financial Management Information System.
Yakubu emphasized the need for transparency and accountability regarding electricity subsidies, clarifying that no government level should carry hidden or unpaid obligations. He explained that maintaining tariffs below actual costs creates financial gaps that must be addressed through subsidies.
“To achieve a stable power sector, we must recognize the financial implications of our choices,” Yakubu stated. “When tariffs are artificially low, a gap arises, constituting a subsidy. A subsidy represents a financial obligation.”
Effective from 2026, the Federal Government will no longer view electricity subsidies as an open-ended responsibility, particularly when both policy decisions and associated benefits are shared across all tiers of government.
“This new policy is not intended to penalize any level of government but rather to promote accountability and operational efficiency within the power sector,” Yakubu noted. He added that the President has instructed relevant authorities to enforce existing electricity laws, ensuring that subsidy-sharing mechanisms are practical, transparent, and enforceable.
“This entails that subsidy costs must be tracked, properly funded, and clearly communicated to prevent them from manifesting as arrears or hidden liabilities,” he explained.
Yakubu concluded that equitable distribution of the financial burden among all tiers of government would motivate collaborative efforts to support cost-reflective tariffs, protect vulnerable citizens, and foster the development of a power market capable of delivering reliable service.
