• Nigeria to end sole federal funding of electricity subsidies from 2026

• Subsidy costs to be shared by federal, state, local governments

• Move aims to curb power-sector spending amid rising budget pressures

The Nigerian federal government will no longer bear the full cost of electricity subsidies from this year, Tanimu Yakubu, director general of the Budget Office of the Federation, said on Feb. 2.

Yakubu made the announcement in Abuja during a workshop on the preparation of the 2026 federal budget.

He said the decision follows an instruction from President Bola Tinubu aimed at establishing a clear framework for sharing electricity subsidy costs among the federal, state and local governments. Until now, the financial burden has been largely supported by the federal government.

Under the new approach, when authorities decide to keep electricity tariffs below actual costs, the resulting shortfall will no longer be covered exclusively by the federal budget. Instead, each level of government will be required to finance the portion of subsidies linked to its own tariff policy decisions, according to guidelines presented by the Budget Office.

Officials said the mechanism will operate under the existing legal framework governing the electricity sector, without any immediate change to the laws currently in force. Relevant ministries, departments and agencies will be expected to include subsidy-related costs explicitly in their budget submissions starting in 2026.

The move comes as Nigeria has been gradually reducing electricity subsidies since 2023, according to local media reports. Following several tariff adjustments, federal authorities have indicated they are seeking to limit the budgetary burden associated with the power sector.

Despite these efforts, public spending remains substantial. In the first quarter of 2025, the federal government spent around $350 million on electricity subsidies, according to data published by the Nigerian Electricity Regulatory Commission (NERC). The funds were used to cover part of wholesale market invoices.

At the same time, the government has launched a process aimed at addressing electricity sector debt linked to arrears owed to producers, Agence Ecofin reported. Over the longer term, investment needs to achieve universal access to electricity are estimated at $34 billion, according to official figures.

Abdel-Latif Boureima