President Bola Ahmed Tinubu has directed that state governments should now share the cost of electricity subsidies alongside the Federal Government, marking a shift in how power sector affordability interventions are funded across the federation.
Under the new arrangement, funding for electricity subsidies will be drawn from the Power Assistance Consumers Fund (PCAF), a government-backed pool designed to support low-income and vulnerable households. The fund aims to ensure electricity affordability amid rising tariffs while stabilising the power sector through targeted support rather than blanket subsidies.
More than 18 states currently operate their own electricity regulatory agencies, with others expected to follow. The states include Lagos, Ondo, Osun, Ekiti, Edo, Delta, Bayelsa, Akwa Ibom, Cross River, Abia, Anambra, Imo, Kogi, Niger, Nasarawa, Plateau, Gombe and Jigawa.
The new policy was disclosed by the Director-General of the Budget Office of the Federation, Mr. Tanimu Yakubu, during the opening of the 2026 Post-Budget Preparation workshop on the Government Integrated Financial Management System (GIFMIS) in Abuja. According to him, states that benefit politically from electricity subsidies must also share the financial responsibility, rather than leaving the burden solely on the Federal Government.
Yakubu explained that holding electricity tariffs below cost creates a funding gap that translates into subsidy obligations. From 2026, he said, subsidy costs must be explicitly tracked, funded, and transparently allocated to prevent the accumulation of arrears and hidden liabilities in the power market.
He added that the President has also directed a review of Nigeria’s Fiscal Responsibility Framework to make fiscal rules more dynamic and enforceable. The review will introduce clearer fiscal anchors, defined escape clauses for economic shocks, stronger reporting standards, and tighter control of contingent liabilities.
The Director-General further noted that the 2026 budget process will prioritise delivery-ready and finance-ready capital projects. He stressed that government spending must shift from long project lists to fewer, well-funded initiatives capable of delivering tangible outcomes such as reliable power, completed roads, functional schools, and effective healthcare facilities.
According to him, the new approach will embed project financing discipline across ministries, departments, and agencies to ensure efficiency, sustainability, and measurable results.
