States and local governments will now share the cost of electricity subsidies with the Federal Government, ending years in which Abuja solely carried the financial burden of keeping power tariffs below cost.
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed the policy shift during a meeting with Ministries, Departments and Agencies (MDAs) on preparations for the 2026 Budget.
Yakubu revealed that the Federal Government spent about ₦1.98 trillion on electricity subsidies between September 2024 and October 2025, describing the figure as unsustainable.
According to him, President Bola Ahmed Tinubu is determined to ensure that electricity subsidies are transparently funded and fairly shared across all levels of government that benefit from them.
“Subsidy costs must be explicit, tracked and funded, so they do not return as arrears, liquidity crises or hidden liabilities in the power market,” Yakubu said.
“When tariffs are held below cost, a gap is created. That gap is a subsidy. And a subsidy is a bill.”
He stressed that where states or councils choose to keep electricity prices low for residents, the financial responsibility must be clearly agreed and enforced, rather than quietly transferred to the Federal Government.
Yakubu explained that sharing the burden would promote better discipline in the power sector, encourage efficiency and strengthen support for protecting vulnerable consumers.
“When everyone carries a fair share of the cost, everyone also has an incentive to support cost-reflective efficiency and a power market that can actually deliver,” he added.
He warned MDAs that electricity subsidy obligations must now be clearly reflected in budget proposals, noting that unpaid obligations often end up as debts that destabilise electricity companies and hurt consumers.
Beyond subsidies, Yakubu said the Federal Government is tightening rules for project inclusion in the 2026 budget, insisting that only projects ready for implementation and financing will be approved.
“If it cannot be implemented, it should not be proposed. If it cannot be measured, it should not be defended,” he said.
He cautioned against the practice of listing numerous poorly funded projects, describing it as “a map of disappointment” rather than a development strategy.
“What citizens feel is delivery – completed roads, reliable power, functional schools and working hospitals,” he said.
Yakubu added that President Tinubu has directed a review of Nigeria’s Fiscal Responsibility framework to strengthen spending discipline, improve transparency and better manage future financial risks.
“Fiscal rules are not a slogan. They are the guardrails of government,” he said, warning that without them, spending becomes impulsive and budgets lose credibility.
Under the revised framework, MDAs will be required to align spending proposals with fiscal limits, disclose future risks and clearly demonstrate measurable outcomes.
“All proposals will be tested to ensure they align with national priorities, are affordable, deliver value for money and respect fiscal limits,” Yakubu said.
FG Power-Sector Interventions
As part of efforts to stabilise the electricity sector, the Federal Government is expanding its metering and reform initiatives.
Under the Presidential Metering Initiative (PMI), the government plans to deploy about two million smart meters annually over the next five years to eliminate estimated billing and close Nigeria’s metering gap.
Power Minister Adebayo Adelabu said about ₦700 billion has been secured from the Federation Account Allocation Committee (FAAC) to fund the rollout, alongside the 3.2 million meters being procured through the World Bank–supported Distribution Sector Recovery Programme (DISREP).
According to Adelabu, the initiative will improve transparency, protect consumers, boost local meter manufacturing and strengthen the financial viability of the power sector.
The Federal Government has also mobilised over $2 billion through development finance programmes, including the World Bank’s DARES, NSIA’s RIPLE and the JICA fund, to expand renewable energy and electricity access.
Meanwhile, the Nigerian Electricity Regulatory Commission (NERC) has approved the disbursement of ₦28 billion to electricity distribution companies under Tranche B of the Meter Acquisition Fund (MAF) to procure and install prepaid meters for all outstanding unmetered Band A customers at no cost.
NERC said the funds will also help accelerate metering for Band B customers, with meters to be distributed in proportion to each DisCo’s contribution.
Providing an update, NERC Vice Chairman Musiliu Oseni disclosed that between 600,000 and 700,000 meters are currently available nationwide, urging DisCos to accelerate deployment.
“Government has made the investment. The responsibility now lies with the DisCos to ensure meters reach customers without delay,” Oseni said.
He also called on electricity operators to cooperate fully with emerging State Electricity Regulatory Commissions, stressing that no operator is above regulatory oversight.