Sharing power sector’s subsidy burdens

2026-02-17 - 23:47

The recent decision by the Federal Government to share the cost of paying electricity subsidies with the States and Local Government Areas, LGAs, is a consequential adjustment to the current realities in our power sector environment. It is another determined effort to reduce the parasitic dependence of sub-national governments on the centre. At a recent training and sensitisation event of the Federal Government’s Ministries, Departments and Agencies, MDAs, the Director-General of the Budget Office of the Federation, Tanimu Yakubu, asserted: “If we want a stable power sector, we must pay for the choices we make. When tariffs are held below cost, a gap is created. The gap is a subsidy. And a subsidy is a bill”. He added that as from this year, the Federal Government is to start sharing the subsidy bill with other tiers in order to liquidate chronic indebtedness to energy providers, which as of the moment, stands at N4 trillion. Nigeria’s journey to de-monopolisation of the Federal Government’s grip on the power sector effectively started in March 2022, when the late President Muhammadu Buhari signed the Constitution Amendment Bill removing the power sector, among others, from the Exclusive List. In June that year, the National Assembly followed suit with the enactment of the Electricity Act of July 2022. President Bola Tinubu signed it into law in June 2024. This devolution of the power sector threw the doors open for the states and local governments as well as private and even foreign investors to get involved to enable rapid development of the power sector. Progressive-minded Nigerians had, for decades, called for devolution of critical elements of governance to enable the country grow. With this new reality, it is no longer reasonable to expect the Federal Government alone to continue shouldering the power sector subsidy burden. Wherever devolutions take place from the Exclusive List, consequential adjustments must be made. The power sector has become an additional investment opportunity which the lower tiers of government and the private sector must invest in to boost local economies. It has provided a greater opportunity for massive re-industrialisation, job creation and curtailment of population drifts to Abuja, Lagos and abroad. State and local government involvement in subsidy payments will help in proliferating cottage industries and producing more affordable goods. We call on the state and local governments to see this new deal as additional means of asserting relevance in the lives of the people, where provision of cheaper or subsidised power becomes a necessary amenity, just like water, roads, hospitals, schools and others. Population retention at the grass roots will drastically reduce the “ungoverned spaces” phenomenon, which attracts undesirable elements such as terrorists, kidnappers, rogue armed herdsmen and others. The three tiers of government should sit down to discuss modalities for its harmonious implementation.