Nigeria stands to gain investments from its new electricity law assented to President Bola Tinubu, however, unlocking such potential hinges on adequate implementation expected to be driven largely by effective regulations.
According to experts, this long-awaited landmark legislation is critical in closing the huge electricity supply gap in Africa’s largest economy, but the government would need to put down a clear framework to guide activities of all players in the market.
President Tinubu last week signed the 2023 Electricity Act, replacing the Electricity and Power Sector Reform Act, 2005.
The law particularly seeks to address teething challenges in all aspects of Nigeria’s electricity value chain – from generation to transmission and distribution to end-users.
As contained in the document seen by BusinessDay, the primary objective is to provide a comprehensive legal and institutional framework to guide the operation of a privatised, contract and rule-based competitive electricity market in Nigeria, and attract through transformative policy and regulatory measures, private sector investments in the entire power value chain of the Nigerian Electricity Supply Industry (NESI).
Specifically, the law seeks to provide an ideal legal and institutional framework to leverage on the modest gains of the privatisation phase of the electric power sector in Nigeria to accelerate growth in power generation capacity and improve utilisation of generated power through increased investments in new and efficient power generation technology and revamping existing power plants.
It also seeks to eliminate through policy and regulatory measures, barriers to investments in generation, transmission, distribution, and related sub-sectors in the electricity industry in Nigeria; while promoting policies and regulatory measures to increase geographic coverage in power generation, transmission, distribution and supply of electricity in Nigeria.
The new law further provides a framework to stimulate the development and utilisation of renewable energy sources and creates an enabling environment to attract investments in renewable energy sources in order to increase the contribution of renewable energy to the energy mix. It also provides a framework for improvement of access to electricity in rural, unserved, underserved, peri-urban and urban areas through the use of conventional sources and renewable energy off-grid and mini-grid solutions; among others.
Those who spoke to BusinessDay sound confident that the new law, if well implemented, would accelerate growth in power generation capacity and improve utilisation of generated power through increased investments in new and efficient power generation technology and revamping existing power plants, but implementation is key.
Kunle Kola Olubiyo, president of Nigeria Consumer Protection Network, said that the Act is a needed instrument, as it will promote rapid development in the electricity sector.
According to him, with the Act, state governments can now partner local and foreign investors to develop the electricity sector value chain within their states.
For Olubiyo, the benefits of the Act include breakdown of market monopoly and promotion of a competitive electricity market that gives end users the right to alternatives.
“By assenting the Electricity Act, 2023, President Tinubu has further deepened true federalism and refined inclusiveness.
“Before now, our mindsets were wrongly contrived based on a unitary system of government and many years of military misrule.
“By deregulation and breaking the monopoly of the electricity market, states now have ample opportunity to generate, transmit and distribute electricity within their jurisdiction.
“Those who are grown up during the days of regional government in Nigeria first republic may see things differently from younger generations of Nigerians. The 36 state governments can now partner with local and foreign investors to invest in the electricity sector value chain within their states.
Speaking further, Olubiyo stated that with the new Act, the sector will be devoid of bureaucratic bottlenecks in addressing the challenges of stable power supply.
“The sector will now be devoid of the unnecessary bureaucratic bottleneck of notorious federal institutions that have in the past deliberately frustrated efforts by states like Lagos and Rivers in addressing the challenges of stable power supply in their domain.
“This will create employment opportunities, upscale social security, re-industrialisation, sustainable growth and development at the grassroots levels and nation at large.
But a senior official of the Federal Government, who pleaded anonymously, stressed the need for regulatory and executive guidance in a timely manner.
Commendably, the Act empowers the federal power ministry to, within one year from the commencement of this law; institute an Integrated National Electricity Policy and Strategic Implementation Plan in consultation with other relevant authorities and other stakeholders to guide the overall development of the electricity sector.
For him, there is a need for the establishment of a legal mechanism to resolve possible disputes or conflicts that may arise between the federal and state laws.
“There is a need for the Nigerian Electricity Regulatory Commission (NERC) to continue to provide required leadership guidance and necessary support.
“In the present circumstance, many states may be unwilling to activate the constitutional amendment because of the huge financial cost implication,” he said.
According to the law, NERC is empowered to create, promote, and preserve efficient electricity industry and market structures, and to ensure the optimal utilisation of resources for the provision of electricity services among others.
The law provides for public private partnerships for provision of access to electricity to all areas including villages, hamlets through rural electricity infrastructure and electrification of households.
It also provides for power–source specific policies including waivers and subsidies that will stimulate development of renewable energy; and overall development of the electricity value chain in Nigeria with emphasis on alignment of expansion of generation, transmission, distribution and supply infrastructure to ensure reliability of supply and minimise losses.
However, Lanre Elatuyi, an Abuja-based power analyst, said that the Act failed to consider the technical and commercial aspect of the sector’s operation.
For him, not all state governments may successfully carry out the generation, transmission and distribution of power, he said, noting that electricity is capital-intensive.
He also expressed the fear of creating a parallel network in states where distribution companies already operate.
“The problem is not the law, but we have not been able to find a balance for technical and commercial issues.
“The issue in the sector is not in terms of geography, but energy that is traded on the grid. We do not have an efficient marketing policy; we have weak regulation and energy theft.
“It is not enough for states to have their own electricity market: that does not address the AT&C loss, we still have entities that do not pay bills,” he said.
He said most states are not viable, adding that they have not attracted foreign investment in years.
Elatuyi stated that state governments can be allowed to participate in power distribution but not the generation and transmission phase.