A long-hidden bill is being brought into the open
The Federal Government has confirmed that from 2026, electricity subsidy costs will no longer be borne solely by the centre but shared across all tiers of government. The policy shift was disclosed by the Director-General of the Budget Office of the Federation, Tanimu Yakubu, during a sensitisation workshop on the 2026 post-budget preparation process in Abuja.
Yakubu said the president wants electricity subsidies to be explicit, practical, and transparent, warning that hidden or unfunded obligations have contributed to persistent instability in the power sector.
When affordability creates a debt problem
According to Yakubu, keeping electricity tariffs below cost inevitably creates a funding gap that must be paid for by someone — a gap he described plainly as a subsidy.
“If we want a stable power sector, we must pay for the choices we make. When tariffs are held below cost, a gap is created. That gap is a subsidy. And a subsidy is a bill,” he said.
He added that from 2026, the Federal Government would stop treating electricity subsidies as an open-ended obligation, particularly where political benefits and policy decisions are shared by states and local governments.
How the sharing model is expected to work
Officials said the existing legal framework governing the electricity sector would be invoked to ensure that subsidy responsibilities are clearly defined, enforceable, and tracked. Under the proposed arrangement, any tier of government that chooses affordability interventions will be required to fund its share transparently.
The Budget Office directed Ministries, Departments and Agencies to fully disclose subsidy-related costs in their 2026 budget submissions, warning against pushing unfunded liabilities into the electricity market.
Why the power sector is under pressure
The policy shift comes amid a deepening liquidity crisis in Nigeria’s electricity sector. Power generation companies are currently owed more than ₦4 trillion, a debt accumulated largely from unpaid subsidies and tariff shortfalls.
Last year, President Bola Tinubu approved a ₦4 trillion bond programme under the Presidential Power Sector Debt Reduction Programme to address the backlog. While the move attracted strong investor interest, critics warned it merely swapped one form of debt for another without resolving the structural causes.
As reform collides with federal realities
Government officials insist the subsidy-sharing plan is not punitive but corrective, arguing that shared financial responsibility will incentivise efficiency, cost-reflective tariffs, and targeted support for vulnerable consumers.
The approach is also closely linked to the Electricity Act 2023, which decentralised power generation, transmission, and distribution, granting states greater authority — and, by extension, greater responsibility.
What this shift could mean for consumers
Analysts say the success of the policy will depend on how states respond. Will they absorb costs to shield residents, or pass the burden on through higher tariffs? Either choice carries political and economic consequences.
If subsidy costs are transparently shared and funded, the power market could stabilise. If disputes emerge over who pays what, Nigeria risks prolonging the cycle of arrears, bailouts, and fragile electricity supply.
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