Eighteen months after President Bola Tinubu signed the Electricity Act, 27 of the 36 states of the federation are yet to begin its implementation.
The Act, signed in June 2023, decentralised electricity generation and distribution, allowing states to create their own electricity markets.
Tinubu’s signing of the Act removes electricity from the exclusive list of the Nigerian Constitution and gives the states the power to generate and regulate power in their domains.
For its smooth implementation, the chairman of the Nigerian Electricity Regulatory Commission (NERC), Sanusi Garba, inaugurated the Legal and Regulatory Working Group, Engineering and Technical Working Group, and the Commercial and Transaction Group at a stakeholders’ meeting in Abuja.
The focus of the implementation of the new Electricity Act was for states to take over the responsibilities of making electricity laws for their areas.
NERC collaborates with states to initiate the process to start regulating electricity.
Under the new law, Nigeria’s power sector now has a two-tier regulatory regime – federal and state.
On their part, states could regulate their electricity markets by issuing licences to private investors who can operate mini-grids and power plants within the state.
This shift in power allows states to manage their own electricity markets, which can help them address unique energy needs, reduce outages, and attract investment.
One of the benefits of the new Electricity Act is that investors can construct, own or operate an undertaking for the generation of electricity not exceeding one megawatt in aggregate at a site, or an undertaking for the distribution of electricity with a capacity not exceeding 100 kilowatts in aggregate at a site, or such other capacity as the commission may determine, without a licence.
However, NERC will continue to regulate national activities, including inter-state and international generation, transmission, supply, trading and system operations.
Also on February 9, 2024, President Tinubu signed the Electricity Act (Amendment) Bill 2024, into law. The bill, which was passed by the House of Representatives on July 27, 2023, and the Senate on November 14, 2023, was sponsored by Babajimi Benson, who represents Ikorodu Federal Constituency of Lagos State.
The Electricity Act (Amendment) Bill, 2024, addresses the development and environmental concerns of host communities and sets aside five per cent of the actual annual operating expenditures of power generating companies (GENCOs) from the preceding year for the development of their respective host communities.
It further provides that the funds set aside for the development of host communities will be received, managed, and administered for infrastructure development in the host communities by a reputable trustee/manager to be jointly appointed by the respective GENCO and their host community.
Before yesterday, only Edo, Oyo, Enugu, Imo, Ekiti, Ondo, Ogun, Kogi states had established relevant laws and received regulatory oversight from (NERC to operate their own electricity markets.
Meanwhile, NERC has issued an order to transfer regulatory oversight of the electricity market to the Niger State Electricity Regulatory Commission (NSERC).
By the development, Niger State has become the ninth to embrace the implementation of the Electricity Act 2023.
Niger State is the second northern state, after Kogi, to have adopted the EA.
NERC said the order to transfer to the state is in continuation with the electricity market liberalisation policy of the federal government.
NERC made this known in a post on its verified X (formerly Twitter) handle on Friday.
This is the ninth state to begin the implementation of the Electricity Act 2023, signed 18 months ago by President Bola Tinubu.
This was in compliance with the Constitution of the Federal Republic of Nigeria and the Electricity Act 2023 as Amended.
In accordance with the provisions of the EA 2023, the commission, however, retains the role as a central regulator with regulatory oversight on the inter-state/international generation, transmission, supply, trading and system operations.
The EA also mandates any state that intends to establish and regulate intrastate electricity markets to deliver a formal notification of its processes and requests NERC to transfer regulatory authority over electricity operations in the State to the State Regulator.
Based on this, the government of Niger State complied with the conditions precedent in the laws, duly notified NERC and requested for the transfer of regulatory oversight of the intrastate electricity market in Niger State.
Following the request, NERC directed the Abuja Electricity Distribution Plc (AEDC) to incorporate a subsidiary (AEDC SubCo) to assume responsibilities for intrastate supply and distribution of electricity in Niger State from AEDC.
The commission said, AEDC shall complete the incorporation of AEDC SubCo within 60 days from January 10, 2024, and the sub company shall apply for and obtain licence for the intrastate supply and distribution of electricity from NSERC, among other directives.
It also directed Ibadan Electricity Distribution Company Plc (IBEDC) to incorporate a subsidiary (IBEDC SubCo) to assume responsibilities for intrastate supply and distribution of electricity in Niger State from IBEDC.
NERC said IBEDC shall complete the incorporation of IBEDC SubCo within 60 days from January 10, 2024. The sub company shall apply for and obtain licence for the intrastate supply and distribution of electricity from NSERC, among other directives.
It directed that all transfers envisaged by this order be completed by July 9, 2025.
Analysts believe that governors have been slow to act due to concerns over the financial implications of implementation amid rising state debts.
Consequently, the federal government has urged state leaders to engage actively with the new legislation to combat persistent power shortages.
North East Working With NEDC To Generate Power – Bauchi Governor
Commenting on this development when he visited the Rural Electrification Agency, Bauchi State governor, Bala Mohammed said the North East is collaborating to use the North East Development Commission (NEDC) as a leeway for electricity generation and distribution.
He said the commission has engaged a consultant to advise the region on its capacity, financial implications and timelines. This, he noted, would mark a significant step towards addressing the energy deficit in the region, where millions remain without access to reliable power.
“Leveraging on the unbundling of the power sector by the Electricity Act, all the sub-nationals have already geared up to make sure they participate or they provide power as part of the unbundling framework.
“We in the North East are driven by collectivism and, of course, peer-review mechanisms. We have the Northeast Development Commission, and it is the centre of our knowledge-based planning and development. We have engaged a consultant to let us know, to make a smooth analysis of our potential and our capacity vis-à-vis finance and timelines. So, all of us are working towards making sure that we leverage on the unbundling electricity market to provide power for our people,” Mohammed had said during a recent working visit to the Rural Electrification Agency.
Experts Highlight Benefits, Task Governors, Investors On Mini-grids, Others
In separate interviews with LEADERSHIP Weekend, experts and energy professionals have identified such projects in most states of the country but remain untapped due to poorly managed national grid infrastructure.
In a chat with our correspondent, a former minister of power, Prof Barth Nnaji, identified the 2023 Electricity Act as a major pathway to power sector reform and a landmark reform to attract private investment and improve service delivery by decentralising power management.
Nnaji added that the Act could play a pivotal role “in balancing the utilisation of our natural resources while facilitating how we can generate, transmit, and distribute adequate power to meet Nigeria’s energy needs.”
He stressed that the Electricity Act is a good step especially for consolidating the laws governing the Nigerian electricity supply industry and establishing a policy framework that empowers state governments and investors.
Nnaji posited that the transformative impact of the Electricity Act 2023, would pave the way for state governments to actively participate in the generation, transmission, and distribution of electricity without causing significant overlap of the federal government’s overarching role in the sector.
Also, a pioneering specialist and leading expert/scholar in electricity laws, Prof Yemi Oke, said Nigeria is ushering in a new era of energy management as the NERC commences the handover of regulatory control of electricity markets to the states.
This shift empowers states to address their unique energy needs more effectively.
States considered not viable in terms of revenue generation and may not have the capacity to raise needed resources to provide energy efficiency for its teeming population, in his opinion, need not borrow or tweak its budget allocation to go into such capital-intensive projects.
Oke said state governors are simply required to build a strong governance structure and provide a commercial structure that will be attractive to investors.
He said states are required to tap into resources available to them and establish mini grid, off-grid systems, renewable, solar and biomass production to meet electricity needs of their states.
A mini-grid is a small-scale electricity supply system specifically designed to generate and distribute electricity cost-efficiently in underserved and off-grid areas. The NERC has consistently striven to ensure that the deployment of mini-grids in Nigeria is bankable and has minimal regulatory hurdles. The Commission has also ensured that electricity tariffs are data-driven and properly regulated.
According to Oke, states with abundant sunshine, hydropower generation opportunities would develop commercially viable structures that will provide return on investment to potential investors.
“We have developed the concept and said that states do not need to dip their hands into their budgets but create an enabling and clement investment climate and naturally investments will simply begin to emerge and grow exponentially,” he said.
On the Act, he said, prior to the new Electricity Act, states participation in power generation and distribution structure has been in place but the reviewed Act simply goes to establish an implementation plan and action.
The don said it is a new vista of hope to properly connect communities that have been largely underserved and outrightly not served in the poorly managed centralised grid system.
Similarly, the chairman of Momas Electricity Meters Manufacturing Company Limited (MEMMCOL), Engr Kola Balogun, said the Act and transfer of regulatory authority to states have been long overdue.
Balogun said it has been advocated before the privatisation of the power sector that a decentralised grid system would usher in a better-managed power distribution, generation and transmission system in Nigeria.
He said the grid system has totally failed in promoting competition and innovation in the sector as well as supporting the government’s industrialisation initiatives.
Balogun, whose company is the only Original Equipment Manufacturer (OEM) in Nigeria’s meter industry said with states taking power structure into their hands, a lot of competitive bidding would result in higher investment opportunities.
He added that industries would begin to spring up in states where electricity is guaranteed.
He said, for instance, in the south-south where gas is in high volume, power plants would begin to emerge for steady power to manufacturers.
On the other hand, the North with abundant hydropower solutions and sunlight could possibly harness those resources and provide 24-hour affordable electricity to industrial operators.
Balogun considers the decentralisation as essential to stimulate investments and allow each state to grow at its own pace in addressing power supply challenges.
With the national grid’s shortcomings and inadequate investments in transmission infrastructure, decentralisation offers a more tailored approach to local energy needs.
The decentralisation of energy regulation in Nigeria, he stressed, marked a pivotal moment in the country’s journey toward a more efficient and sustainable power sector. Nigeria is addressing local energy needs more effectively and fostering economic growth by empowering states like Lagos, Rivers, Kano and Ogun to manage their electricity markets.
The experts predicted massive investment in the power sector in the next one decade as governors could use it as a political strategy and selling points to attract not only votes but investments to boost the revenue of their states.
We’ve got the edge. Get real-time reports, breaking scoops, and exclusive angles delivered straight to your phone. Don’t settle for stale news. Join LEADERSHIP NEWS on WhatsApp for 24/7 updates →
Join Our WhatsApp Channel
