Electric power can be regarded as a public and economic good that is central to human development. Certainly, the modern world, its activities and benefits are driven by access to electricity, which ensures that productive or value-added processes are turned into goods and services that can be consumed within countries or exported for wealth generation. In view of its central position in the economy, it’s not surprising that the Constitution as the highest law of the land provides for a national approach to the electricity sector.
The 1999 Constitution (as amended) is the primary legal vehicle that provides the fundamental principles according to which the Nigerian State is governed. It essentially provides the parameters of the powers, functions and relationship between arms and levels of government. All entities within the country are subject to the supremacy of the Constitution.
One of the key problems with the Nigerian 1999 Constitution in relation to national development has been its provisions on the electric power sector which were amended, recently. Remarkably, the provisions merely replicate the position in the earlier 1979 Constitution. The constitutional amendment has been long overdue and certainly, energy experts have hitherto called on the Federal Government to limit its monopolistic stranglehold on the power sector to allow for liberalisation that enables constituent State governments to participate in this important area of governance.
The Pre-Amendment Constitutional Regime
The starting point for the 1999 Constitution is its heritage as a document enacted under the auspices of an unelected military dictatorship. This is reflected, for instance, in its insistence on absolute ownership of crude oil, natural gas and other mineral resources under s44(3). Interestingly, it does not indicate a centralised approach to electricity, which is put on the Concurrent and not the Exclusive Legislative List. This allows the National Assembly and State Houses of Assembly to make laws subject to their legislative powers under Part II of the 2nd Schedule to the 1999 Constitution as amended. As a matter of constitutional law, if either body enacts laws outside the limits of its powers, then that law will be null and void.
Paragraphs 13 and 14 of Part II of the Second Schedule to the 1999 Constitution, as amended, sets out the main provisions governing the governmental ability to regulate the electricity sector as follows – “The National Assembly may make laws for the Federation or any part thereof with respect to electricity and the establishment of electric power stations; the generation and transmission of electricity in or to any part of the Federation and from one State to another State; the regulation of the right of any person or authority to dam up or otherwise interfere with the flow of water from sources in any part of the Federation; the participation of the Federation in any arrangement with another country for the generation, transmission and distribution of electricity for any area partly within and partly outside the Federation; the regulation of the right of any person or authority to use, work or operate any plant, apparatus, equipment or work designed for the supply or use of electrical energy”.
The clear wording of the above provision shows that the Federal Government oversees the generation, transmission and distribution of electric power. This power covers the entire territory of the Federal Republic of Nigeria which naturally includes the constituent states. Moreover, the National Assembly can make laws to govern bilateral electricity generation, transmission and distribution of electricity for areas within and outside the country. This is not necessarily limited to the immediate neighbouring countries surrounding Nigeria, as there is potential for involvement in a West African interconnector that powers national grids across the sub-region.
In relation to States, the Constitution did not, unfortunately, adopt the same broad approach as it does with its Federal counterpart. The Concurrent Legislative List encompasses matters that are of common interest to the Federal and State governments, thus allowing legislatures at both levels to make laws. The exact wording is reproduced below for absolute clarity.
“A House of Assembly may make laws for the State with respect to electricity and the establishment in that State of electric power stations; the generation, transmission and distribution of electricity to areas not covered by a national grid system within that State; and the establishment within that State of any authority for the promotion and management of electric power stations established by the State”.
The net result of the above wording is to allow State Houses of Assemblies to enact laws on electricity within the land territory of the state. Unfortunately, the decentralised constitutional powers granted were subject to an important limitation that hindered State government participation. While states have powers over generation, transmission and distribution, their authority does not cover areas within the national grid. This important exclusion restricts the operational abilities of states to regulate electricity even within their jurisdictions. Moreover, the Federal Rural Electrification Agency also provides off-grid electricity with a focus on renewable energy throughout the federation.
Read also: Fast-Moving Consumer Goods – legal and regulatory implications for online retailers
The Constitutional Amendment
On 17th March 2023, President Muhammadu Buhari assented to the Fifth Alteration Bill (No. 17) 2023 which amends the Constitution of the Federal Republic of Nigeria 1999 to allow States to generate, transmit and distribute electricity in areas covered by the national grid; and for related matters.
The landmark modification to the Concurrent List means that all 36 States can generate, transmit and distribute electricity throughout their territories. It removes the earlier exclusion of states from areas covered by the national grid. States are now constitutionally allowed to licence and control the entire value chain of the electricity sector in conjunction with the Federal Government. In other words, the National Assembly and State Legislatures can legislate on the electricity sector subject to federal laws having precedence in the event of conflict under s4(5) of the 1999 Constitution as amended.
Implications of the Constitutional Amendment
The challenge is now on State governments to draft appropriate legal and regulatory frameworks to govern their electricity sectors. It would be advantageous to focus on local energy resources. Therefore, new institutions such as State electricity regulators and supervising ministries must be considered. There is thus an urgent need for capacity building and hiring expert consultants to minimise regulatory risk and increase administrative efficiencies. The few states with existing laws like Lagos State will also have to review their institutional and legal regime in line with extant realities.
Although the amendment seemingly refers to States operating within their landmass, there does not seem any impediment to inter-state cooperation. This could perhaps allow a few neighbouring states to develop common generation, transmission, and distribution assets. Also, there is nothing to stop a state that has generated excess power from selling it to another state or industrial customers located elsewhere. The way forward is to adopt a cooperative governance model that avoids confusion and uncertainty between Federal and State governments.
While there is no restriction on State governments investing in conventional energy resources to boost urgently needed power to underserved areas of the state, it would be useful to utilise this opportunity to focus on renewable energy as a means to address energy poverty. The possibility exists for States to engage in the production and sale of carbon credits or carbon offsets, in line with the ongoing energy transition. Also, States in the South-South region sitting on abundant gas deposits can invest in gas power plants. More controversially, South-East governments might wish to collaborate to develop coal power plants and other infrastructure, though there might be problems obtaining international finance for “dirty coal”. All options for quick acceleration of Nigeria’s development must be carefully investigated in a cost-benefit matrix with a focus on practicality and consistent Federal government support.
Is the Constitutional Amendment a Panacea?
There is no doubt that the Constitutional Amendment removes an unnecessary bottleneck on State governments. Yet, it is not a simple solution to a highly complex problem. The electricity sector is expensive to fund and manage. Despite the investment of billions of dollars since 1999, there has been remarkably little impact on a growing population and business or industrial customers. Also, few States have the financial capacity to directly invest in and create an internal electricity market. Hence the need to share risks and invest in collaborative ventures between contiguous states. This would require carefully negotiated and drafted legal agreements.
At the moment, the Federal Government and its institutions such as the Federal Ministry of Power, Nigeria Electricity Regulatory Commission (NERC), Nigerian Electricity Management Services Agency (NEMSA), Rural Electrification Agency etc have operated to the exclusion of State governments. There is, thus, an urgent need to revisit the legal and regulatory architecture that would provide for a dual regulatory regime. In particular, NERC and State regulators will have to address inter alia, oversight responsibilities, monitoring, and customer engagement within an effective cooperative governance regime that does not significantly increase compliance costs.
One potential stumbling block, for example, is the potential conflict between State governments and privately owned electricity Distribution Companies (Discos) which are licenced and regulated by NERC. This could be an issue if a State government wishes to distribute electricity in a place with existing distribution facilities. These are not insurmountable problems, however, there is a need for compromise and carefully negotiated guidelines and codes involving all stakeholders.
Furthermore, the entrance of State governments and the creation of new markets will not address current challenges to the electricity sector and might exacerbate some problems. These include cost-reflective tariffs, policy inconsistency, funding shortfalls, corruption, poor metering and lack of political will to streamline electricity governance. In other words, the opportunities inherent in the constitutional amendment might not achieve intended goals if stakeholders do not undertake a coherent effort to address these challenges.
Finally, the Federal Government is commended for addressing a constitutional issue that has plagued the electricity sector for over three decades. Former Governors Bola Ahmed Tinubu (Lagos State) and Peter Odili (River State) were unfortunately frustrated in their attempts to intervene in the electricity sector during their regimes. Nevertheless, the Federal Government will continue to play the lead role in the electricity sector. The emergence and growth of State electricity markets will depend on innovative and proactive measures within a cooperative governance model. This will ensure the development of a modern national grid and other infrastructure as well as off-grid competition that should eventually result in affordable electricity for all.
Prof Dayo Ayoade mni is an Energy and Natural Resources Law Specialist based in Lagos
