President Bola Tinubu has directed that state governments will now jointly bear the cost of electricity subsidies alongside the Federal Government, marking a major shift in how power-sector support is funded. The subsidy will be financed through the Power Assistance Consumers Fund (PCAF), a government-backed pool aimed at cushioning electricity costs for low-income and vulnerable households through targeted support rather than blanket subsidies.
According to the Director-General of the Budget Office of the Federation, Tanimu Yakubu, states that benefit politically and economically from subsidised electricity must also contribute financially. He said the new approach will make subsidy costs transparent, properly tracked and explicitly funded, preventing them from re-emerging as unpaid debts within the power market. More than 18 states already operate electricity regulatory agencies, positioning them as active players under the new burden-sharing framework.
The directive is part of broader fiscal reforms ahead of the 2026 budget cycle. The President has also ordered a review of Nigeria’s Fiscal Responsibility Framework to strengthen enforcement, improve reporting, and better manage liabilities. Ministries, departments and agencies (MDAs) will be required to align spending proposals with fiscal rules and focus on fewer, well-prepared, and finance-ready capital projects.
Reactions have been cautious. The Nigerian Governors’ Forum said it is still reviewing the decision, while several State Electricity Regulatory Commissions held an emergency meeting to assess its implications. Meanwhile, economic analysts argue the move is inevitable, given the rising cost of electricity subsidies and the difficulty for the Federal Government to sustain them alone, especially amid broader economic and political pressures.
