The plot against the Electricity Act 2023 (Concluding part)

In this concluding part, the discussion moves beyond the legal and constitutional questions to explore the practical implications of the proposed amendments.

The real battle: Federalism, power and Nigeria’s electricity future

What NERC could be doing is intentionally sharing with states the IP it has gathered on each state since 2006: data, records and lessons from historical interactions with market participants in each state, collated, indexed, placed in secure locations, updated regularly and awaiting notices from the states. NERC could also have ordered all DisCos since 2023 to restructure into HoldCos and state subsidiaries, establish state technical boundaries with appropriate metering at relevant 132kV/33kV substations, and report on technical, commercial and financial performance thenceforth.

Instead, this amendment seeks to establish NERC not as a partner, collaborator or mentor, but as an overlord. For instance, in proposed Section 230C, the Bill revives the language the constitutional amendment removed in a rather unclever manner. It proposes that state exclusive jurisdiction applies only to intra-state electricity activities “not connected to, or reliant on, the national grid system”. Activities relying on the national grid or interstate generation would remain subject to overriding NERC regulation. This is the discarded formula in new clothes. It states: You may regulate your market, but only if your market is electrically isolated from the national grid.

This regulation is electrically absurd. Distribution is, by nature, connected to transmission. Indeed, distribution can be explained to a non-engineer as “very low-voltage transmission”. The point at which distribution is transformed into transmission voltage is technically unmistakable and physically well defined. So, the fact that public electricity supply in states comes through the national transmission grid does not make distribution a federal subject. Almost every serious state market will interface with the national grid, the system operator, interstate generation or wholesale procurement. The point of the 5th Alteration was not to create 36 isolated electrical islands. It was to create federalised markets capable of interfacing with one another and with the national grid under clear technical and commercial rules that distinguish between state and national markets.

Fourth, NEMSA. The bill seeks to preserve and expand NEMSA’s nationwide inspectorate and technical certification role, including over distribution networks and installations within state markets. Of course, safety, standards and inspections matter. But if a state has constitutional authority over distribution and intra-state electricity operations, it also has authority to determine how inspection, certification and safety enforcement will be carried out within that state. It may retain NEMSA. It may create its own electrical inspectorate. It may accredit independent inspectors. It may adopt national standards voluntarily. But NEMSA cannot be imposed on state markets as if the constitutional amendment never happened.

Fifth, the proposed Forum of Electricity Regulators in Sections 228A–228F. Cooperation among regulators is necessary. Nigeria needs a forum where NERC, state regulators, the system operator and other institutions align on grid-interface rules, market settlement, cross-border transactions, model codes and dispute avoidance. But in a federation, such a forum must be one of coordinate institutions, not a hierarchy disguised as consultation. The bill’s proposed forum goes too far. It creates a federally constituted body in which NERC plays the only active, obviously dominant role. It moves from advice to control and confers on NERC final administrative appellate jurisdiction over disputes involving state regulators and state markets. That is constitutionally offensive and institutionally unwise because state regulators are not NERC branch offices. They are regulators established under state laws pursuant to constitutional authority exclusive to the states. They must cooperate with NERC where markets interface, but they are not subordinate to NERC within their own jurisdiction.

The sixth problem is fiscal hypocrisy. The federal government cannot insist on re-centralising electricity regulation and then ask states to share electricity subsidy costs, as Director-General of the Budget Office of the Federation, Dr Tanimu Yakubu, did recently. Reports of proposed deductions from FAAC allocations raise a fundamental question: who owns the problem? If Abuja wants control, Abuja should bear the fiscal consequences. If States are expected to share the burden, they must have genuine authority to determine whether they want to subsidise their citizens’ electricity access and, if so, how. They must have scope to shape markets, investments, tariffs and service delivery within their territories. It cannot be centralised control and federalised costs.

An electricity subsidy is not an accounting entry. It affects tariffs, investment, service quality, liquidity, fuel supply, public trust, DisCo incentives and fiscal sustainability. A riverine state, an industrial state, a rural state, a megacity state and a hydro-host state do not have identical electricity problems. Each must decide whether its citizens are best served by a consumption subsidy or a capex subsidy or perhaps both. A single subsidy mechanism controlled from Abuja cannot solve these different problems. That is probably why the Power Consumer Assistance Fund established by EPSRA 2005 and continued in the 2023 Act has never been physically established.

Seventh, timing. The Electricity Act is barely settling. States are still learning. Institutions are being formed. Regulators are being staffed and trained. Market rules are being developed. Some states are considering concessions or outright sales of their operating assets. Commercial and financing counterparties are assessing pre-investment risk. NERC is yet to gain the trust of the states to work with them to establish procedures and precedents for transferring IP from itself to the states. NISO and NBET are still coming to grips with their successor arrangements. State players and regulators are beginning to learn about market settlement, tariff reform, gas-to-power obligations, off-grid growth, embedded generation and planning state-level reforms. This is not the moment for destabilising amendments that tell investors Nigeria may reverse its most important electricity reform yet.

What lies behind all this plotting?

Legislation should solve real problems. What problem does this bill solve? Have states complained that the Act gives them too much autonomy? Has the federal government shown that state markets are creating chaos? Have consumers demanded that Abuja continue to control distribution inside states? The answer is no. What we have seen is the opposite: States taking responsibility, development partners supporting implementation, investors exploring State-level opportunities, and practical decentralised reform finally emerging. Have investors asked for NERC to be superior to state regulators? The answer could be yes. If so, which ones and why?

The bill misdiagnoses the sector. Nigeria’s electricity problem is not that states have too much power. It is that Abuja has had too much ineffective control for too long. The national market did not fail because states regulated it. States did not create the chronic liquidity crisis, metering failure, broken subsidy architecture, weak gas-to-power settlement chain, fiction of available capacity without commercial offtake, or politics-driven transmission expansion. These were failures of the centralised model. Why rush to restore that model?

The answer may lie in bureaucratic survival instincts. Federal agencies, even those originally established as reformers, that have grown to define their existence through their being and revenues, not their reform mandates, will resist any mandate requiring them to devolve and coordinate rather than command and contract. Legislators accustomed to treating electricity as federal may struggle to accept that states now have real authority. Some market participants may prefer the devils they know in Abuja to the new, uneducated ones in the States. Yet special interest discomfort is not a reason to vandalise reform.

To be clear, no serious advocate of state electricity markets argues for regulatory anarchy. Nigeria needs coordination, a strong national system operator, coherent grid codes and interoperability between state markets and the national wholesale market. It needs rules for interstate trade, cross-border transactions and grid-connected generation. It needs safety standards, consumer protection, anti-vandalism provisions and dispute resolution. It needs a national conversation in which federal and state policymakers and regulators together discuss reliable, sustainable interstate trade.

What remedies?

But cooperation must follow the Constitution. Collaboration is better than coercion. National standards can be developed in national workshops and adopted by states. NISO can define and enforce grid-interface rules for the national grid and regional grids serving groups of state markets. NEMSA can provide services where retained or recognised by states. A voluntary regulators’ forum can support model rules. The National Council on Power can become a real intergovernmental platform. The National Economic Council can address fiscal and subsidy questions. None of this requires subordinating states to federal agencies.

So, what should happen? First, the National Assembly should stop the bill in its current form. Not amend around the edges. Stop it, because its philosophy is wrong.

Second, the Nigeria Governors’ Forum should take a common position. This is not an Akwa Ibom, Enugu or Lagos issue. It is a constitutional federalism issue. If the National Assembly can claw back electricity powers by ordinary legislation today, it can do the same in other devolved sectors tomorrow.

Third, any future amendment must start with accepting the Constitution’s meaning, not institutional preference. The question is not what NERC, NEMSA, the Ministry or any committee would like to control. The question is what the Constitution permits.

Fourth, states must accelerate implementation, but wisely. The best defence of state electricity markets is performance. States must build credible regulators, avoid politicising tariffs, design bankable markets, protect consumers, attract investment, meter customers, support productive clusters, create rural access programmes and prove that decentralisation can deliver results. In this, the responsibility is shared with federal MDAs because they are custodians of the intellectual property — institutional memory, data and precedents — that states need to get their work started with. Federal MDAs, especially NERC, have an obligation to grandfather and not hold back this precious IP.

Consolidate. Not constrained.

It is a curious irony that this is a private member’s bill from the Senate Committee on Power, chaired by Senator Enyinnaya Abaribe, who represents the good and hard-working people of the Abia South Senatorial District. This constituency is the home of the Geometric Aba ringfence, Nigeria’s only functional state-based and state-focused utility. This IPP is now regulated by the Abia State Electricity Regulatory Authority and serves 9 LGAs of the old NEPA Aba and Osisioma business districts, including the world-famous Ariaria Market.

With the other 8 LGAs outside the Geometric ring fence now served by a disco called New Era, the natural next step is to build on the foundation of the Aba ring fence, think through and sort out commercial and technical issues, enable the Geometric IPP to expand to serve the New Era disco area, and establish a precedent for how an embedded generator can become a utility provider in a natural gas-rich state. Such precedent would provide learning that can be applied in a fuel-neutral manner in other areas where other types of fuel are prevalent.

The Electricity Act, 2023, is not perfect. No law is. But its central insight is correct: Nigeria’s electricity future will not be built by recentralising yesterday’s failure. It will be built by enabling states to exercise their constitutional duty to build electricity markets within their territories, accountable to their citizens, connected where necessary to the national grid, but not subordinate to Abuja.

This is the reform to protect. That is why this amendment bill, in its present version, ought to be redrafted to consolidate and build on the gains of the Electricity Act, 2023, and not to constrain the measurable progress it is already bringing.

Eyo O. Ekpo is the CEO, Excredite Consulting Limited and a past commissioner, Nigerian Electricity Regulatory Commission.