The Federal Government plans to end its sole responsibility for electricity subsidies beginning with the 2026 budget, as President Bola Ahmed Tinubu has directed that the cost of power subsidies be shared across federal, state and local governments.
Under the new approach, any tier of government that chooses to reduce electricity tariffs for its residents must clearly identify how the subsidy will be funded, ensuring transparency and accountability.
The directive was disclosed on Monday in Abuja by Tanimu Yakubu, Director-General of the Budget Office of the Federation, during a training programme for government officials.
Yakubu said the move is aimed at preventing electricity subsidies from becoming “hidden debts” that undermine the financial health of Nigeria’s power sector. “If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed and enforceable. This is not punishment. It is alignment,” he said.
He explained that the policy would promote fairness and efficiency in the electricity market by ensuring that the Federal Government is no longer treated as the default payer whenever tariffs are kept artificially low. “In 2026, we will stop pretending that this bill can be left to the Federal Government alone, especially where the policy choice or political benefit is shared across tiers of government,” Yakubu added.
Electricity subsidy payments under the new framework will be financed through the Power Assistance Consumers Fund (PCAF).
The PCAF is a government-backed mechanism designed to provide targeted support for economically vulnerable households, helping to cushion the impact of rising electricity tariffs. Unlike blanket subsidies, the fund focuses on expanding energy access and strengthening the power sector through structured assistance programmes.
The shift comes as more states take on regulatory roles in the electricity market. At least 18 states, including Lagos, Ondo, Osun, Ekiti, Edo, Delta, Bayelsa, Akwa Ibom, Cross River, Abia, Anambra, Imo, Kogi, Niger, Nasarawa, Plateau, Gombe and Jigawa, have established operational electricity regulatory agencies, with others preparing to follow.
Beyond electricity, the President also ordered stricter discipline in capital spending for the 2026 budget, warning against the proliferation of uncompleted projects.
Yakubu quoted the President as describing long lists of stalled projects as a “map of disappointment”, stressing that only projects with completed designs, clear funding plans and realistic completion timelines will be admitted into the budget. “What citizens feel is delivery—completed roads, reliable power, functional schools, working hospitals,” Yakubu said.
To curb rising public debt, the President has also ordered a review of government spending rules, introducing stricter scrutiny of budget proposals. Ministries and agencies will now be required to justify every kobo requested and demonstrate how proposed spending aligns with fiscal rules, sustainability goals and measurable outcomes.
As a result, the 2026 budget will prioritise completing critical projects rather than launching numerous initiatives that risk abandonment, with every spending request subjected to tests of realism, national relevance, and value for money.
