Nigeria Enacts Electricity Act to Boost Energy Autonomy

States Gain Power Rights, Aim for Efficient Local Control

by Adenike Adeodun

In a landmark shift towards energy autonomy, Nigeria has embarked on implementing the Electricity Act of 2023, a significant legislative change that dismantles the federal government’s monopoly over electricity and opens the sector to state governance and private investment. This pivotal development was discussed extensively this week in Lagos, where state officials, electricity supply industry operators, and various stakeholders convened to strategize the Act’s roll-out.

The Electricity Act 2023 fundamentally transforms how electricity is generated, transmitted, and distributed across Nigeria. It grants states, along with businesses and citizens, the authority to manage these functions within their jurisdictions, thus encouraging local governance and attracting private sector participation. This decentralization is expected to foster a more competitive and efficient energy market, responsive to the specific needs and capabilities of individual states.

However, the Act restricts states from engaging in interstate or transnational electricity distribution, which maintains certain central regulatory roles. To date, only Lagos, Edo, and Kaduna states have enacted their electricity market laws, empowering them to fully regulate their local markets according to the new Act. The remaining 33 states are still under the regulatory purview of the Nigerian Electricity Regulatory Commission (NERC) until they establish their legislative frameworks.

The conference in Lagos served as a critical platform for dialogue and planning. Dr. George Oluwande, head of the Engineering and Technical Workgroup for the Electricity Act 2023 implementation, highlighted the efforts to align state-level operations with federal standards to ensure seamless and fault-free electricity distribution across the nation. He emphasized the importance of adopting national standards and grid codes at the state level to maintain uniformity in systems operation.

Further, Immanuelle Okwedy from Energy Market and Rates Consultants Limited advocated for capacity building for state governments. This initiative, proposed to be in collaboration with NERC and the Nigeria Governors’ Forum, aims to equip state administrations with the necessary skills and knowledge to effectively transition to managing their electricity sectors.

Wolemi Esan, leading the Legal and Regulatory Workgroup for the Act’s implementation, stressed the need for states to develop specific power policies. He proposed conducting readiness assessments for states transitioning to electricity regulation, joint audits of state electricity distribution company assets and liabilities, and mapping of physical and electrical boundaries across states. These measures are critical for ensuring that states are adequately prepared to take on their new responsibilities under the Act.

Dr. Yusuf Ali, NERC Commissioner for Planning, Research and Strategy, and NERC Chairman Sanusi Garba both reaffirmed the Commission’s commitment to supporting states during this transition. They recognized the series of workshops, seminars, and meetings as essential tools for a smooth transfer of regulatory responsibilities from the national level to the states.

The Electricity Act of 2023 is hailed as a revolutionary step towards liberalizing Nigeria’s electricity market. It aims to extend regulatory reach and establish a coherent policy framework to mitigate operational and systemic risks in the Nigerian Electricity Supply Industry (NESI). According to an assessment by KPMG, the Act addresses significant statutory and operational challenges previously faced in the NESI. It decouples distribution from retail functions and introduces statutory recognition of electricity distribution franchising, which is expected to open new avenues for retail competition and increase third-party investments in the distribution sub-sector.

This legislative overhaul marks a significant milestone towards establishing a competitive and self-sustaining power sector market in Nigeria. By empowering states and encouraging private investment, the Electricity Act of 2023 promises to enhance the efficiency, reliability, and accessibility of electricity supply across the nation, aligning with global trends towards decentralization and market-driven energy governance. As Nigeria continues on this path, the collaborative efforts of all stakeholders will be paramount in realizing the full potential of this transformative policy.

Source: ESI Africa

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