Nigerians could face higher electricity costs as the federal government ends subsidies, channeling N1.1 trillion into upgrading transmission infrastructure and finishing projects aimed at reducing system failures and improving the stability of the national grid.
The policy direction was disclosed during the 2026 Service-Wide Budget Training held on February 2, 2026, where the Director-General of the Budget Office, Tanimu Yakubu, said the government would no longer treat electricity subsidy as an open-ended federal obligation.
According to Yakubu, the 2026 budget framework prioritises infrastructure delivery and bankable capital projects, with no allocation made for tariff support. He noted that the decision aligns with President Bola Ahmed Tinubu’s directive to impose fiscal discipline and improve transparency across public finances.
Under the new framework, the federal government has introduced a burden-sharing model that assigns responsibility for electricity price support to the specific tier of government that chooses to subsidise tariffs. This means any federal, state, or local government that opts to keep electricity prices below cost-reflective levels must fund the difference directly from its own budget.
The reform aims to eliminate opaque subsidy arrangements and prevent the accumulation of unfunded arrears in the electricity market. Officials said subsidy costs would now be explicit, tracked, and fully funded, reducing the risk of hidden liabilities that have historically weakened the sector.
Despite the withdrawal from tariff support, the government said it is intensifying capital investment in the sector. The ₦1.1 trillion allocation is intended to strengthen grid stability, finance critical transmission infrastructure, and complete projects to reduce system failures and national grid collapses.
Yakubu added that only delivery-ready projects would be admitted into the 2026 capital budget. Such projects must have completed designs, costings, and procurement plans, reflecting a shift from fragmented project listings to structured project financing supported by budgetary funds, public-private partnerships, and blended finance arrangements.
The power sector reforms form part of the government’s broader “Single-Train” budget strategy for 2026, which consolidates legacy and rollover projects into a single, transparent pipeline. The approach is intended to improve accountability and ensure that public spending results in measurable outcomes rather than recurring fiscal leakages.
