The Federal Government says state governments will now jointly bear the cost of electricity subsidy along with the centre, following a directive by President Bola Tinubu to restructure how power subsidies are funded.
According to Vanguard, funding for electricity subsidies will be channelled through the Power Assistance Consumers Fund (PCAF), a government backed pool created to support low income and vulnerable households with targeted bill relief instead of blanket subsidies.
Director General of the Budget Office of the Federation, Tanimu Yakubu, disclosed the new policy at a 2026 Post Budget Preparation workshop in Abuja, saying states that enjoy the political benefits of low electricity tariffs must also help fill the financing gap created by subsidies.
In remarks delivered on his behalf by Director of Expenditure (Social), Yusuf Muhammed, Yakubu quoted the President as directing that a “clearer framework” be operationalised to share electricity subsidy costs across the federation so they are not treated as an “open ended” federal fiscal burden.
He explained that when tariffs are held below cost, the shortfall becomes a subsidy and “a subsidy is a bill,” adding that from 2026 the government will stop pretending that the entire bill can be left to the Federal Government alone.
Under the new approach, subsidy costs must be explicit, tracked and properly funded so they do not reappear as arrears, liquidity crises or hidden liabilities in the power market. Yakubu stressed that if any tier of government chooses an affordability intervention, its responsibility for that subsidy must be “clear, agreed and enforceable.”
He argued that when all tiers carry a fair share of the cost, they are more likely to support cost effective, efficiency targeted protection for vulnerable consumers and to back reforms that strengthen the electricity market.
Yakubu urged ministries, departments and agencies to ensure subsidies are reflected transparently in their plans and submissions, warning against pushing liabilities into the market as unpaid arrears or unfunded commitments. He also said Tinubu has ordered a review of Nigeria’s Fiscal Responsibility Framework to make fiscal rules more dynamic, enforceable and linked to measurable results.
The article notes that more than 18 states already operate their own electricity regulatory agencies, including Lagos, Ondo, Osun, Ekiti, Edo, Delta, Bayelsa, Akwa Ibom, Cross River, Abia, Anambra, Imo, Kogi, Niger, Nasarawa, Plateau, Gombe and Jigawa, with others preparing to follow.
Reacting, the Nigerian Governors’ Forum said it was still reviewing the details and would comment later, while several state electricity regulators held an emergency virtual meeting to study the implications of the directive.
Some experts, such as Centre for the Promotion of Private Enterprise CEO Muda Yusuf, backed the idea of states sharing subsidy costs, arguing that the Federal Government alone can no longer sustain a fast growing electricity subsidy bill that already runs into trillions of naira owed to generators and gas suppliers.
Others, including power sector advocate Bode Fadipe, questioned whether Abuja has the constitutional power to compel states to pay for subsidies, warning that any cost sharing framework must be voluntary, transparent and backed by clear rules rather than fiat or politically driven deductions from FAAC allocations
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