States, Councils to Share Electricity Subsidy Burden as FG Reviews Power Spending

States and local governments will now share the cost of electricity subsidies with the Federal Government, ending the long-standing practice where Abuja solely bore the financial burden.

The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed this during a meeting with Ministries, Departments and Agencies (MDAs) on preparations for the 2026 budget. He revealed that between September 2024 and October 2025, the Federal Government spent about ?1.98 trillion on electricity subsidies alone.

Yakubu said President Bola Tinubu approved the new approach to prevent electricity subsidy costs from becoming unsustainable and damaging the power sector.

According to him, subsidies must be clearly identified, properly funded and transparently tracked to avoid hidden debts and liquidity crises in the electricity market.

“When tariffs are set below the actual cost of supply, the difference becomes a subsidy. And a subsidy is a bill that must be paid,” Yakubu said, stressing that any government benefiting from such decisions must also share the financial responsibility.

He explained that spreading the burden across all levels of government would promote efficiency, improve sector performance and strengthen protection for vulnerable electricity consumers.

Yakubu warned that electricity subsidies can no longer be treated as a Federal Government obligation alone, directing MDAs to clearly reflect all subsidy-related costs in their budget proposals rather than passing unpaid obligations to power companies.

Beyond power subsidies, the Budget Office chief said the 2026 budget will focus strictly on projects that are ready for execution and financing.

“If a project cannot be implemented or measured, it should not be proposed,” he said, cautioning that long lists of poorly funded projects often result in unmet public expectations.

He added that every project must now come with clear designs, approvals, funding sources and timelines, whether financed through the federal budget, private partnerships or other arrangements.

Yakubu also disclosed that President Tinubu has ordered a review of the Fiscal Responsibility framework to strengthen spending discipline, improve transparency and better manage future financial risks.

Under the revised approach, MDAs will be required to justify spending plans based on fiscal rules, sustainability and measurable outcomes.

The overall objective, he said, is to ensure the 2026 budget prioritises project completion and tangible improvements in infrastructure, power supply, education and healthcare.