At least 15 Nigerian states are at various stages of developing operational electricity markets, marking a significant shift in the country’s power sector landscape two years after the enactment of the Electricity Act 2023, BusinessDay’s findings have revealed.
The development represents a fundamental restructuring of Nigeria’s electricity architecture, transitioning from a centralised federal system to a multi-tier market where states can build, regulate, and operate their own power infrastructure.
Adebayo Adelabu, minister of Power, confirmed at the last PwC roundtable that the transition has moved beyond policy formulation into active implementation, with states demonstrating unprecedented initiative in taking ownership of electricity access within their territories.
“Fifteen state electricity markets are currently at different stages of development. Nigeria has transitioned from a centralised, one-size-fits-all electricity system to a dynamic, multi-tier federation of electricity markets,” Adelabu stated, emphasising that the shift was a ‘structural necessity,’ given the country’s population of over 200 million people.
BusinessDay’s findings show that Edo, Ekiti, Enugu, Imo, Kogi, Lagos, Niger, Ogun, Ondo, and Oyo have established regulatory agencies, with Plateau, Abia, Akwa Ibom and Delta recently following suit.
Despite the momentum, financial sustainability remains a major concern. The distribution segment continues to face severe liquidity pressures, with the sector’s indebtedness exceeding N4 trillion by December 2024 and monthly subsidy accumulation averaging N200 billion.
Rekhiat Momoh, chief executive officer of Eko Electricity Distribution Company, revealed that her company alone carries outstanding receivables exceeding N183 billion, comprising N66 billion from government Ministries, Departments and Agencies (MDAs), N96 billion from residential customers, and N20 billion from commercial and industrial customers.
“Legacy debt remains one of the heaviest burdens on the distribution segment,” Momoh said, noting that many distribution companies operate with negative capital positions and remain constrained by acquisition debts from the 2013 privatisation exercise.
Industry data show that average aggregate technical, commercial and collection losses across the sector remain at approximately 40 percent, while collection efficiency averages only 70 percent, meaning nearly one-thirds of billed energy revenue is lost monthly.
Lagos State has emerged as the frontrunner in implementing sub-national electricity regulation, having enacted its electricity market law and established a regulatory commission staffed with experienced industry practitioners.
Biodun Ogunleye, commissioner for Energy and Mineral Resources in Lagos, explained that the state requires in excess of 6,000 megawatts of reliable electricity to meet current and near-term demand, necessitating aggressive infrastructure investment and private capital mobilisation.
“Lagos has adopted a transitional, non-punitive engagement approach with existing utilities to stabilise operations and sustain investor confidence,” Ogunleye said, highlighting the state’s focus on rapid improvements in supply reliability and full metering coverage.
The Lagos regulatory model includes structured dialogue with utilities, joint performance benchmarking, and phased compliance, rather than immediate enforcement actions. The state is also developing embedded generation assets, franchising models, and preparing for grid-connected renewable infrastructure, including what would be Nigeria’s first hydrogen power plant.
However, Ogunleye cautioned that electricity sector financing must be approached with fiscal responsibility, warning against “unguarded pledging of statutory revenue inflows” that could present material sovereign risk to future administrations.
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Human capital gaps
Human capital deficits, particularly at the state level, represent a major risk to successful decentralisation. Replicating regulatory and operational expertise across 36 states requires sustained investment in technical capacity that many states cannot currently afford.
The federal government has strengthened collaboration with the National Power Training Institute of Nigeria to expand the pipeline of skilled personnel, with a targeted programme to train 100 power-sector engineers annually. The 10-year objective is to develop at least 1,200 highly skilled engineers for the industry.
Abba Aliyu, managing director of the Rural Electrification Agency (REA), noted that the transition has triggered ‘unprecedented engagement’ between federal institutions and sub-national governments, with structured collaborations involving more than 20 states on electricity-access mapping and state-specific electrification pathways.
“The passage of the Electricity Act has fundamentally altered the behaviour of sub-national governments, creating both the legal authority and institutional confidence for states to take direct responsibility for electrification outcomes,” Aliyu said.
Concrete outcomes are already emerging.
In Adamawa State, the government has assumed ownership of a renewable energy training centre and partnered with a private provider to equip 500 youths with renewable energy skills. In the North-East generally, excess generation capacity from a 12-megawatt installation is being structured into a commercial arrangement to supply a state-owned water treatment facility.
Despite the challenges, investor interest in sub-national electricity markets is increasing. Peter Olowononi, director of Client Relations for Anglophone West Africa at African Export-Import Bank, said the emergence of state-driven end-to-end electricity strategies has introduced new credit-relevant structures.
“States are increasingly approaching development finance institutions with integrated, end-to-end energy security strategies that link generation, distribution and offtake within a single investment framework,” Olowononi explained. “This structural coherence significantly strengthens project bankability.”
He revealed that at least one advanced state-level transaction is under consideration where a sub-sovereign entity is leveraging statutory revenue inflows to acquire a stake in a distribution company, creating an integrated energy-security platform.
For lenders, these sub-national, vertically coordinated energy strategies materially improve risk visibility, as smaller, well-defined market units allow for clearer analysis of supply, demand, and cash-flow control.
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BusinessDay’s findings show that system performance indicators show measurable improvement. Sector revenue increased from approximately N1 trillion in 2023 to about N1.7 trillion in 2024, with projections of N2.3 trillion by end-2025. Government subsidy obligations have reduced by about N700 billion.
Installed generation capacity has increased to approximately 14 gigawatts, with a historic peak generation of 5,801.44 megawatts recorded in 2025. Grid collapses declined from about 12 incidents in 2024 to one incident in 2025.
Through the Presidential Metering Initiative and the Distribution Sector Recovery Programme, over 13 million meters are programmed for deployment to address the persistent metering gap that has weakened consumer confidence and distorted billing accuracy.
“The transition to a multi-tier electricity market is no longer optional; it is a structural necessity and the pathway to a reliable, competitive and economically viable power sector,” Adelabu concluded.
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