President Bola Tinubu has directed that state governments share the cost of electricity subsidies alongside the Federal Government, marking a major shift in power sector financing. Funding will come from the Power Assistance Consumers Fund (PCAF), designed to support low-income households and stabilise tariffs.
From 2026, subsidy responsibility will no longer rest solely on the FG. Tanimu Yakubu, DG of the Budget Office, explained that states enjoying the political benefits of subsidies must also bear part of the cost. The new framework aims to track and fund subsidy costs transparently, ensuring efficiency and protection for vulnerable consumers.
Experts say co-payment could accelerate reforms, encourage targeted subsidies, and incentivise local power investments. However, concerns linger on enforceability, especially for poorer states, with legal and fiscal frameworks needing clarity. Observers note that direct FAAC deductions may be required, but flexibility and transparency are key to avoiding disputes.
The move aligns with ongoing electricity reforms giving states more regulatory authority and could reshape Nigeria’s power market, making subsidies more sustainable and promoting accountability.
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