Electricity Act: Decentralising Without Capacity Building To Worsen Power Crisis, Stakeholders Warn

As Nigeria embarks on reforms to decentralise its fledgling power sector through the Electricity Act 2023, experts are raising urgent alarms over the risks posed by transferring regulatory authority to state governments without adequate capacity building. While the Act grants states legal authority to regulate electricity, this move to decentralise power oversight risks deepening fragmentation and instability within the sector unless robust institutional frameworks and coordination mechanisms are implemented.

Though the government is deepening policy to ensure a sustainable overhaul of the power sector in Nigeria, there are fears of a possible cynical approach by state governments to which regulatory authority is being transferred.

While the Electricity Act 2023 is working towards fulfilling the constitutional mandate by granting states legal authority to regulate electricity, Adetayo Adegbemle, executive director of Powerup Nigeria, says this decentralisation  harbours significant risks.

Speaking with the LEADERSHIP on regulatory transfer to the state governments, Adegbemle says that transferring power is sparse and paltry.  He says, “Successful implementation demands robust institutional capacity, coordination mechanisms, and legal harmonisation. Without these, the Act risks fragmenting Nigeria’s electricity market rather than empowering it inclusively. “

According to him, a core concern is regulatory fragmentation, as granting autonomy to 37 states invites high regulatory transaction costs.

He cites an instance of a warning by PwC, that this can distort markets and fuel unhealthy interstate rivalry, fracturing the national landscape.

On his part, the legal commissioner of the Nigerian Electricity Regulatory Commission (NERC), Dafe Akpeneye, further cautions that conflicting tariff orders and misaligned regulations can destabilise grid operations and deter investors.

By decentralising prematurely—without establishing national frameworks or regional templates—the Act risks creating isolated regulatory silos that confuse consumers and inflate developers’ costs.

The stark reality of states’ institutional capacity gaps compounds this. Many lack the financial resources, technical expertise, or human capital to manage electricity markets effectively.

Analysts note that only a few states undertook serious regulatory work after NERC’s initial devolution of powers; others have yet to draft essential frameworks like meter-based tariffs, anti-theft rules, or wholesale pricing mechanisms.

The PwC emphasises that numerous states haven’t conducted feasibility studies or secured funding to establish functional regulatory agencies. Without engineers, economists, legal analysts, and tariff experts, state regulators risk becoming rubber stamps—or worse, instruments for political rent-seeking. Legislating authority is not synonymous with operational competence.

Consumers face tangible threats, particularly tariff inequality

With states setting tariffs independently—some subsidising heavily, others reflecting full costs—border communities could see price disparities exceeding 60 per cent.

Adegbemle infers, “Despite Section 34’s call for interstate coordination, no national guardrails exist: no standardised subsidy policy, no mechanism to ensure minimum access for low-income (Band E) households. If industries migrate to low-tariff states, the fiscal burden will shift disproportionately to residential consumers, undermining equity. Transparent, unified tariff design isn’t merely advisable—it’s fundamental to consumer protection and market integrity. “

“Investor confidence is equally imperilled as the amendment attempts have already sown uncertainty, freezing investments amid perceived regulatory instability. “

PwC stresses that ambiguous rules across 36 regulators, unpredictable fees, and conflicting state laws deter capital commitment. Even the spectre of the proposed “Amendment Bill 2025”—described by FOCPEN as a “backdoor constitutional walk-back”—further dampens investment interest.

“Moreover, the Act cannot resolve Nigeria’s grid fragility alone. Ten grid collapses in 2024—driven by underinvestment, vandalism, and ageing infrastructure—highlight systemic weaknesses transcending state boundaries. Without national coordination, asset transfer disputes (e.g., transmission lines spanning multiple states) could paralyse planning and delay critical upgrades. While states gain regulatory roles, federal entities retain control over interstate wheeling and generation dispatch. States are regulators, not grid operators. If Enugu slashes tariffs but Kaduna suffers a downstream grid collapse, consumers pay regardless—exposing the illusion of true autonomy amid persistent grid instability, adds Adegbemle.

To move forward, he says Nigeria must replace celebratory rhetoric with pragmatic steps, such as establishing a national template for State Electricity Regulatory Commissions (SERCs) and mandating minimum standards mirroring NERC’s Metering, Theft, and Tariff Codes.

He also wants gradual decentralisation, transferring powers only to states that demonstrate readiness via financial plans, staffing, assets, and technical teams.

Adegbenle calls for the adoption of regional regulators or consortia (e.g., North-West pooling) to preserve economies of scale while accommodating local flexibility. He also called for the harmonisation of wholesale pricing and cross-border rules under NERC oversight, preventing double licensing for interstate investments.

He advocates activation of the dormant Power Consumer Assistance Fund (PCAF) before removing subsidies to protect vulnerable consumers and suspending amendment bills until all state laws are operational, prioritising stakeholder consultation over hasty legislation.

He believes the Electricity Act 2023 holds potential but demands urgent course correction.

Without strong federal leadership, meticulous transition planning, and frameworks to bridge state capacity gaps, Nigeria risks fragmented markets, higher electricity costs, and investor flight, he adds.

True empowerment requires devolved authority, shared standards, enforceable guidelines, and institutional resilience. Absent these, the Act threatens to deepen the very power chaos it sought to resolve, he warns.