President Bola Tinubu has ordered state governments to share the cost of electricity subsidies alongside the Federal Government. The funding for these subsidies will now come from the Power Assistance Consumers Fund (PCAF), a government-backed pool designed to support low-income and vulnerable households, maintain affordability amid rising tariffs, and stabilize the power sector through targeted interventions rather than blanket subsidies.
Currently, more than 18 states operate their own electricity regulatory bodies, with others planning to do the same. These states include Lagos, Ondo, Osun, Ekiti, Edo, Delta, Bayelsa, Akwa Ibom, Cross River, Abia, Anambra, Imo, Kogi, Niger, Nasarawa, Plateau, Gombe, and Jigawa.
The directive was disclosed by the Director-General of the Budget Office of the Federation, Tanimu Yakubu, during the opening of the 2026 Post-Budget Preparation Workshop on the Government Integrated Financial Management Information System (GIFMIS) in Abuja. Yakubu emphasized that states benefiting politically from electricity subsidies must also contribute to covering the funding gap, rather than leaving the burden solely to the Federal Government.
Speaking through the Director of Expenditure Social, Yusuf Muhammed, Yakubu stated:
“Mr. President has directed a clearer framework to share electricity costs across the federation, so the burden is not treated as an open-ended federal residual. If we want a stable power sector, we must pay for the choices we make. When tariffs are kept low, a gap emerges – that gap is a subsidy, and a subsidy is a bill.”
He further stressed that from 2026, electricity subsidies will no longer be the sole responsibility of the Federal Government. The new framework will make subsidy costs transparent, tracked, and properly funded to avoid arrears, hidden liabilities, or liquidity crises.
“If any tier of government opts for affordability interventions, responsibilities must be clearly defined, agreed upon, and enforceable. This is alignment, not punishment,” Yakubu said, noting that cost-sharing will encourage efficiency and better protection for vulnerable consumers.
The Budget Office boss urged states and MDAs to include subsidy-related costs transparently in their fiscal plans, warning against pushing liabilities into the market as arrears or unfunded commitments. He also revealed that President Tinubu had instructed a review of the Fiscal Responsibility Framework to make fiscal rules more dynamic, enforceable, and delivery-focused.
“Fiscal rules are the guardrails of government. Without them, spending becomes impulsive, debt casual, and the budget merely a statement of intent. The 2026 budget direction is about modernizing these rules and ensuring capital proposals are delivery-ready,” Yakubu said.
Governors and state electricity regulators reacted cautiously. The Nigerian Governors’ Forum said it was reviewing the directive, while regulatory commissions in Lagos, Imo, Enugu, Ekiti, Oyo, Ondo, Edo, Niger, and Anambra convened an emergency meeting to assess the implications for the states and the wider power sector.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises (CPPE), stated that states must play a more active role in electricity subsidies. He compared the arrangement to the petrol subsidy era, when states indirectly funded subsidies through FAAC allocations. Yusuf noted that rising subsidy obligations made it increasingly difficult for the Federal Government to bear the cost alone and emphasized that shared responsibility was inevitable.
Experts agreed that the policy was a major fiscal and political shift. Prof. Wumi Iledare of FUPRE Energy Business School highlighted that co-payment could accelerate electricity sector reforms, drive cost-reflective tariffs, and promote targeted subsidies. However, legal practitioner Bode Fadipe raised concerns over the Federal Government’s constitutional authority to compel states to contribute, suggesting that contributions would have to be voluntary.
Lanre Elatuyi, an electricity market expert, added that FAAC deductions might enforce state participation but warned this could spark disputes. He emphasized the need for accurate data on electricity consumption within states to ensure fair contributions.
Overall, the directive represents a significant move to ensure a sustainable, transparent, and accountable approach to electricity subsidies, encouraging both federal and state governments to share the cost and responsibility for the sector’s stability.
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