The Federal Government has announced plans for states and local government councils to begin sharing the cost of electricity subsidies, ending the long-standing arrangement where the burden was borne solely by the centre.
In the 12-month period between September 2024 and October 2025, the Federal Government spent N1.98 trillion on electricity subsidies.
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, disclosed the new cost-sharing arrangement during a meeting with Ministries, Departments and Agencies (MDAs) on the 2026 budget preparation. He said President Bola Ahmed Tinubu is determined to ensure that the heavy financial burden of electricity subsidies is no longer left to the Federal Government alone.
“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.
“Let me be direct. 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.”
Yakubu stressed that where the benefits of subsidised electricity are shared across different tiers of government, the financial responsibility must also be shared transparently and by prior agreement.
According to him, a fair distribution of the subsidy burden would drive better performance in the power sector and strengthen protection for vulnerable consumers.
“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 said.
He explained that the directive aims to ensure electricity subsidy costs are properly tracked and funded to prevent them from becoming “hidden debts” that undermine the power sector. He added that if any level of government chooses to keep electricity tariffs low, the financial implications must be clearly defined and enforced.
Yakubu told MDAs that subsidy-related costs must now be clearly reflected in their budget proposals, warning against pushing unpaid obligations into the power market as debts that later destabilise electricity companies and consumers.
Beyond power subsidies, the Budget Office chief said the Federal Government is also reforming how projects are treated in the 2026 budget. He noted that only projects that are ready for implementation and, where necessary, capable of attracting financing will be considered.
“If it cannot be implemented, it should not be proposed. If it cannot be measured, it should not be defended,” he said.
He cautioned that listing numerous projects without proper funding and planning often results in disappointment for citizens.
“A long list of projects is not a development strategy. It is often a map of disappointment. What citizens feel is delivery – completed roads, reliable power, functional schools, working hospitals,” Yakubu added.
He said the government is now prioritising proper project financing, requiring that every project be carefully planned, costed and matched with a clear funding source, whether from the federal budget, private sector partnerships or other financing options.
On fiscal discipline, Yakubu revealed that President Tinubu has directed a review of the Fiscal Responsibility framework to better align it with current economic realities.
“Fiscal rules are not a slogan. They are the guardrails of government. Without guardrails, spending becomes impulsive, debt becomes casual, and the budget becomes a statement of intent rather than a tool of delivery,” he said.
He explained that the review would introduce clearer spending limits, stronger reporting standards, improved control of future financial risks and a tighter link between long-term planning and annual budgets.
“For MDAs, this changes the conversation. You will not only be asked what you want to spend. You will be asked how it fits the fiscal rules, how it affects sustainability, and what measurable results it will deliver,” Yakubu said.
He urged MDAs to align proposals with available resources, clearly state priorities and disclose potential risks, especially future financial obligations.
According to him, all proposals for the 2026 budget will be assessed to ensure they align with national priorities, are implementable, offer value for money and comply with Nigeria’s fiscal limits. The overall objective, he said, is to focus the 2026 budget on completing projects and solving real problems for Nigerians.
FG Interventions in Power Sector
As part of efforts to reform the electricity sector, the Federal Government introduced the Presidential Metering Initiative (PMI) to improve efficiency, restore public trust and make the power sector financially viable. The initiative aims to deploy millions of smart meters to close the metering gap, protect vulnerable consumers and eliminate estimated billing.
Minister of Power, Adebayo Adelabu, said the Federal Government has secured about N700 billion to roll out two million meters annually over the next five years under the PMI. He disclosed this at the 2025 Nigerian Energy Forum themed “Powering Nigeria through investment, innovation and partnership”, noting that the funds were sourced from the Federation Account Allocation Committee (FAAC).
According to Adelabu, the PMI complements the 3.2 million meters being procured under the World Bank-supported Distribution Sector Recovery Programme (DISREP), positioning Nigeria to close its metering gap within five years.
“In the past two years, more than two billion dollars has been mobilised through key programmes, including the World Bank’s DARES, NSIA’s RIPLE, and the JICA fund,” he said. “These interventions are accelerating renewable energy deployment and access to reliable power.”
Meanwhile, the Nigerian Electricity Regulatory Commission (NERC) has approved the disbursement of N28 billion to electricity distribution companies (DisCos) under Tranche B of the Meter Acquisition Fund (MAF) for the procurement and installation of prepaid meters for all outstanding unmetered Band A customers at no cost.
In an order signed by NERC Vice Chairman, Musiliu Oseni, and Commissioner for Legal, Licensing and Compliance, Dafe Akpeneye, the commission said the funds are also aimed at expediting the closure of the metering gap for customers under Tariff Band B.
“The N28 billion shall be allocated in proportion to the respective contributions of the DisCos, and the DisCos are expected to meter all outstanding unmetered Band A customers,” the order stated. “All the meters to be procured and installed under the MAF framework shall be provided at no cost to the customers.”
NERC disclosed that in April 2024, it released N21 billion under Tranche A of the MAF scheme from accrued funds of N21.864 billion, bringing the total intervention under the scheme to N49 billion so far.
Speaking recently at the 4th Nigerian Electricity Supply Industry (NESI) Stakeholders’ Meeting in Abuja, Oseni said between 600,000 and 700,000 meters are currently available for distribution nationwide and urged DisCos to accelerate deployment.
“There are currently 600,000 to 700,000 meters available in the country. Government has made the investment, so the DisCos need to step up,” he said.
Oseni also called on DisCos to cooperate fully with the ongoing transition to State Electricity Regulatory Commissions, stressing that no operator is above regulatory oversight.
