President Tinubu Directs States to Cover Electricity Subsidy Costs

President Bola Tinubu has directed state governments to share the financial responsibility for electricity subsidies with the Federal Government.

It was gathered that funding for the subsidy will now be sourced from the Power Assistance Consumers Fund (PCAF).

The PCAF is a government-backed financial pool created to subsidise electricity bills for low-income and vulnerable households, ensure affordability amid rising tariffs, and stabilise the power sector through targeted support rather than blanket subsidies.

More than 18 states are currently operating their own electricity regulatory agencies, with others preparing to do the same.

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 directive was disclosed by the Director-General of the Budget Office of the Federation, Tanimu Yakubu, at the opening of the 2026 Post-Budget Preparation Workshop on the Government Integrated Financial Management Information System (GIFMIS) in Abuja on Tuesday.

Yakubu said state governments that enjoyed the political benefits of electricity subsidy must also share in funding the gap created by the subsidy and not leave the burden to the Federal Government alone.

Speaking in an address read on his behalf by the Director of Expenditure Social, Mr Yusuf Muhammed, he said, “Mr President has directed that we operationalise a clearer framework to share the cost of electricity across the federation, so the burden is not treated as an open-ended fiscal residual. I mean federal residual. Let me be direct.

“If you want a stable power sector, we must pay for the choices we make. When tariffs are held low cost, a gap is created. That gap is a subsidy, and a subsidy is a bill.”

Yakubu stressed that from 2026, electricity subsidy would no longer be treated as the sole responsibility of the Federal Government.

“In 2026, we will stop pretending that this bill can be left to the Federal Government alone, especially where the policy choice or the political benefit is shared across tiers of government.

“Mr President directed us to invoke the electricity sector legal framework to make burden-sharing practical and transparent,” he said.

He explained that the new framework would ensure subsidy costs were clearly identified, tracked, and funded.

“This means subsidy costs must be explicit, tracked, and funded, so they do not return as arrears, liquidity crisis, or hidden liabilities in the market.

“It also means that if any tier of government chooses affordability intervention, the responsibility must be clear, agreed, and enforceable. This is not punishment. It is an alignment,” he added.

According to him, cost-sharing would incentivise efficiency and targeted protection for vulnerable consumers.

“When everyone carries a fair share of the cost, everyone also has an incentive to support cost-effective, efficiency-targeted protection for the vulnerable, and empower a market that can actually deliver for MDAs,” he said.

The Budget Office boss urged states and MDAs to reflect subsidy-related costs transparently in their fiscal plans.

“The implication is simple: make subsidies-related costs visible in your planning and submission. Do not push liabilities into the market as arrears or unfunded commitments. 

Support transparent, rule-based attribution and financing of affordability decisions,” he said.

Yakubu also disclosed that President Tinubu had directed the Budget Office and MDAs to review the Fiscal Responsibility Framework to make fiscal rules more dynamic and enforceable.

“Fiscal rules are not a slogan; they are the guardrails of government. Without guardrails, spending becomes impulsive, debt becomes casual, and the budget becomes a statement of intent rather than a tool of delivery,” he said.

He explained that the 2026 budget direction was to modernise fiscal rules rather than abandon them.

“That means clearer fiscal anchors, better-defined escape clauses for genuine shocks, and a credible path back to compliance when those clauses are used,” Yakubu said.

The D-G added that capital proposals in the 2026 budget must be delivery-ready and, where necessary, finance-ready.

“A long list of projects is not a development strategy. It is often a map of disappointment. What citizens feel is delivery — completed roads, reliable power, functional schools, and working hospitals,” he said.

He noted that the government was shifting from merely naming projects to financing and delivering them.

“It means prioritisation: fewer projects, better funded, better delivered. If we do this, the budget becomes a pipeline of completion, not a catalogue of unfinished work,” he said.

Governors, Regulators React Cautiously

Reacting to the development, the Director of Media and Communications of the Nigerian Governors’ Forum, Yunusa Abdullahi, said the forum was still reviewing the directive.

“We are reviewing the context and content of the information. We will not be making further comments on it,” he said.

Similarly, State Electricity Regulatory Commissions in Lagos, Imo, Enugu, Ekiti, Oyo, Ondo, Edo, Niger, and Anambra held an emergency virtual meeting to review the situation.

A member of the commission, who spoke to journalists anonymously, said, “We cannot make our official position known immediately. We are hearing it for the first time and are currently meeting to review it.

“The government has taken steps in recent times to stimulate the sector by deregulating activities and making states play active roles, but we need to interrogate this decision and understand its implications for the states and the entire power sector.”