The Federal Government has announced plans to stop bearing electricity subsidy costs solely, unveiling a new framework that will share the responsibility among the federal, state, and local governments starting in 2026.

The Director-General of the Budget Office of the Federation, Tanimu Yakubu, made this known on Monday in Abuja at a training and sensitisation workshop for ministries, departments, and agencies on the 2026 post-budget preparation process using the Government Integrated Financial Management Information System Budget Preparation Sub-System.

Yakubu said President Bola Tinubu had ordered that electricity subsidy costs be clearly identified, properly tracked, and equitably distributed across all tiers of government, noting that the existing system breeds hidden liabilities and repeated crises in the power sector.

“If we want a stable power sector, we must pay for the choices we make,” he said. “When tariffs are held below cost, a gap is created. That gap is a subsidy. And a subsidy is a bill.”

He added that beginning in 2026, the Federal Government would stop handling electricity subsidies as an unlimited responsibility carried only by the centre, particularly in cases where policy choices and political gains are jointly shared.

“In 2026, we will stop pretending that this bill can be left to the Federal Government alone, especially where the policy choice or the political benefit is shared across tiers of government,” Yakubu said.

According to him, the President has directed that the current legal framework governing the electricity sector be applied to make subsidy sharing workable, transparent, and enforceable.

“This means subsidy costs must be explicit, tracked, and funded, so they do not return as arrears, liquidity crises, or hidden liabilities in the market,” he said. “If any tier of government chooses affordability interventions, the funding responsibilities must be clear, agreed, and enforceable.”

Yakubu emphasised that the policy was not meant to be punitive, but rather a strategy to harmonise incentives across tiers of government and enhance efficiency in the electricity sector.

“This is not punishment. It is alignment,” he said. “When everyone carries a fair share of the cost, everyone also has an incentive to support cost-reflective efficiency, targeted protection for the vulnerable, and a power market that can actually deliver.”

He urged MDAs to clearly capture subsidy-related expenses in their 2026 budget proposals and refrain from shifting unfunded obligations onto the electricity market.

It was earlier reported that as the Federal Government grappled with settling more than N4tn owed to power generation companies, it accumulated about N1.98tn in electricity subsidy obligations over a 12-month period, from October 2024 to September 2025.