The Federal Government has directed that state governments will now share the cost of electricity subsidy with the Federal Government, marking a major shift in Nigeria’s power sector financing.
The decision, approved by President Bola Tinubu, means funding for electricity subsidy will henceforth be drawn from the Power Assistance Consumers Fund (PCAF), a facility designed to support low-income and vulnerable households amid rising electricity tariffs.
The Director-General of the Budget Office of the Federation (BoF), Mr. Tanimu Yakubu, explained in Abuja that the subsidy burden had become too heavy for the Federal Government alone, as it has created mounting debts in the power sector. He noted that since states also benefit politically from keeping tariffs low, they must contribute to covering the subsidy gap.
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Yakubu added that subsidies must now be clearly planned, transparently tracked, and properly funded to avoid arrears and hidden liabilities in the electricity market.
More than 18 states currently operate their own electricity regulatory agencies, a development the Federal Government says justifies shared responsibility in the sector.
However, the Nigerian Governors’ Forum (NGF) and several State Electricity Regulatory Commissions (SERCs) have said they are still reviewing the policy before making an official statement.
While some energy experts support the move as necessary for sustainability and accountability, others have raised legal concerns, questioning whether the Federal Government has the constitutional power to compel states to pay electricity subsidies.
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Analysts also warn that poorer states may struggle to bear the additional financial burden, raising questions about how the cost-sharing formula will be determined.
The policy is expected to spark further debate among federal and state authorities, as well as power sector stakeholders.
