Nigeria Poised for Decentralized Electricity Markets,But Regulatory Conflicts Loom
ABUJA – A proposed amendment to Nigeria’s Electricity Act of 2023 is set to allow state governments greater control over electricity distribution within their borders,marking a meaningful shift in the nation’s power sector. Though, experts warn the changes, while intended to address chronic power shortages, could trigger jurisdictional disputes between federal and state regulators.
For decades, Nigeria’s electricity sector has been plagued by inefficiencies, limited access, and a heavy reliance on a centralized national grid. Despite being Africa’s largest economy, a substantial portion of the population remains without reliable electricity access. The current administration has identified decentralized power generation and distribution as a key strategy to bridge this gap, and the proposed amendment aims to provide the legal framework for this transition.
The amendment establishes a “guided federalism” approach, granting states the authority to develop and manage their own electricity markets, notably those already possessing advanced plans like Lagos, Enugu, Edo, and Kaduna. This includes the ability to attract investment, establish local regulations, and address specific regional power needs.
The bill also outlines several key objectives: strengthening coordination between national and state regulatory bodies, tackling mounting debts within the sector, criminalizing the vandalism of electricity infrastructure, clarifying the transfer of regulatory powers, improving engagement with host communities of power facilities, balancing labor rights with service obligations, and replacing the current, financially unsustainable subsidy regime with a Power Consumer Assistance Fund.
However, concerns are rising about the potential for conflict. Emeka Okpukpara, a partner at The nextier Group, cautions that the amendment’s language could create more confusion than clarity. “the amendment introduces a form of regulatory duality,” he explained. “While it appears to empower states, it together leaves room for the Nigerian Electricity Regulatory Commission (NERC) to intervene, potentially leading to overlapping mandates, conflicting standards, and regulatory duplication.”
Okpukpara fears NERC’s established national presence and technical expertise could overshadow state-level initiatives, hindering the intended empowerment. He highlights the risk of a “constitutional rivalry” between federal and state governments if the amendment is passed in its current form, emphasizing the need for careful management and a clear delineation of responsibilities.
The success of this decentralized approach hinges on the capacity of individual states to establish and operate functioning electricity markets. Many states currently lack the technical expertise and financial resources to effectively manage this transition,potentially exacerbating existing inequalities in access to power.Despite these challenges, the bill represents a pivotal moment for Nigeria’s electricity sector, offering subnational governments a legal foundation to address power deficits independently and potentially unlock new avenues for investment and innovation. The coming months will be crucial in determining whether the promise of decentralized power can be realized without triggering a protracted regulatory battle.
