The Federal Government has directed state governments to begin sharing the cost of electricity subsidies alongside the centre, marking a major fiscal shift in Nigeria’s power sector as subsidy obligations continue to rise.
President Bola Tinubu gave the directive, with funding for the subsidy to be drawn from the Power Assistance Consumers Fund (PCAF), a government-backed pool designed to support low-income and vulnerable electricity consumers through targeted interventions rather than blanket subsidies.
The directive comes as more than 18 states—including Lagos, Ondo, Osun, Edo, Delta, Akwa Ibom, Abia, Anambra and Niger—now operate electricity regulatory agencies under the Electricity Act, with others preparing to do so.
Disclosing the decision in Abuja, Director-General of the Budget Office of the Federation, Tanimu Yakubu, said states that benefit politically from subsidised electricity must also bear part of the fiscal burden. He stressed that subsidies create funding gaps that must be transparently shared across tiers of government.
Yakubu said the President ordered a clearer burden-sharing framework to prevent electricity subsidies from becoming hidden liabilities that fuel liquidity crises in the power market, adding that affordability interventions must be explicit, tracked and properly funded.
He also revealed that the Tinubu administration has directed a review of Nigeria’s Fiscal Responsibility Framework to strengthen fiscal discipline, improve reporting of contingent liabilities and better align medium-term planning with annual budgets.
Reacting, the Nigerian Governors’ Forum said it was reviewing the policy, while state electricity regulatory commissions from several states held an emergency meeting to assess its implications for state finances and the broader power sector.
The Centre for the Promotion of Private Enterprise (CPPE) said states should act as active partners in the electricity sector, arguing that the rising cost of subsidies has become unsustainable for the Federal Government alone, particularly in a pre-election period.
However, legal and power-sector experts questioned the Federal Government’s authority to compel states to fund electricity subsidies, noting that the wholesale electricity market remains federally controlled and warning that enforcement could trigger constitutional and fiscal disputes.
Analysts said the policy could either deepen tensions between the federal and state governments or force greater discipline, transparency and reform in electricity financing, depending on how the burden-sharing framework is implemented.
