The funding mechanism will now draw from the Power Assistance Consumers Fund (PCAF), a centralized pool designed to keep electricity affordable for vulnerable groups. PCAF replaces blanket subsidies with targeted support, ensuring energy access while stabilizing the sector. Currently, over 18 states—including Lagos, Edo, Kogi, and Plateau—operate their own regulatory agencies, with more expected to follow.
A Transparent, Shared Responsibility
Tanimu Yakubu, Director-General of the Budget Office of the Federation (BoF), announced the directive at a fiscal workshop in Abuja. He emphasized that states benefiting from subsidized power must now share the financial burden: "If tariffs are kept artificially low, someone must pay the gap—that’s the subsidy. In 2026, we can no longer pretend this is solely a federal responsibility."
Yakubu outlined a stricter framework to track and attribute subsidy costs, preventing hidden liabilities or arrears. "This isn’t punishment; it’s alignment. When costs are visible, all tiers of government have incentives to prioritize efficiency," he added. The policy also ties subsidies to measurable outcomes, requiring states to integrate these expenses into their budgets.
Mixed Reactions from Stakeholders
The Nigerian Governors’ Forum (NGF) and state electricity regulators are reviewing the directive, with some calling for clarity on implementation. A member of the State Electricity Regulatory Commissions (SERCs) noted, "We need to understand the implications before reacting. States are active players, but this decision requires careful scrutiny."
Private sector voices like Dr. Muda Yusuf (CPPE) acknowledged the inevitability of the move, citing parallels with past fuel subsidy models. "The subsidy burden is unsustainable for the federal government alone. States must step up as stakeholders," he said, though he cautioned about political sensitivities amid economic hardships.
Legal and Practical Hurdles
Experts raised concerns about enforcement. Legal consultant Bode Fadipe questioned the federal government’s authority to mandate state expenditures: "Can Abuja dictate how states spend their funds? The policy’s feasibility hinges on voluntary cooperation, not coercion." Others, like energy analyst Lanre Elatuyi, suggested FAAC deductions as a workaround but warned of potential disputes over consumption data.
Professor Wumi Iledare framed the shift as a double-edged sword: "This could either deepen fiscal crises or force accountability. The outcome depends on transparency—whether subsidies are rule-based or politicized."
Broader Fiscal Reforms
The directive is part of wider efforts to modernize Nigeria’s fiscal rules, linking budgets to tangible deliverables like completed infrastructure. Yakubu stressed: "A laundry list of projects isn’t development. Citizens want results—functional schools, reliable power. In 2026, we’re prioritizing fewer projects but ensuring they’re fully funded and delivered."
As debates continue, the policy marks a pivotal moment in Nigeria’s energy sector, testing the balance between federal authority and state autonomy while grappling with the urgent need for sustainable financing.
