Nigeria: Energy Sector Challenges: 5 Key Issues That Require Immediate Action

I. A Reform with Promise—and Peril

Yes, the Electricity Act 2023 fulfills a constitutional mandate and provides a legal basis for state‑level electricity regulation. But granting power to the States is only half the story—successful decentralization demands institutional capacity, coordination mechanisms, and legal harmonization. Without these, the Act risks becoming a vehicle for market fragmentation rather than inclusive empowerment.

II. Multiple Regulators = Market Fragmentation

IT must be stated that State Regulatory Autonomy comes with high regulatory transaction costs:

• PwC warned that 37 distinct state electricity laws could result in market distortions and unhealthy rivalry, disrupting the national market.
• Mondaq predicts multiple licensing across states would significantly increase operational delays and compliance costs for multi‑state GENCOs, DisCos, and IPPs.
• NERC’s own Legal Commissioner cautioned that lack of regulatory alignment could destabilize grid operations and drive away investors, especially when tariff orders conflict.

By decentralizing too fast—before setting a national framework or regional templates—the Act risks creating regulatory silos that confuse customers and inflate overheads for developers.

III. States’ Capacity: Fact or Fiction?

Many States simply lack the financial, technical, and human resources to manage electricity markets effectively:

• Several analysts note that only a handful of states ever started serious regulatory work after NERC ceded authority. Others have yet to draft meter‑based tariffs, rules for theft reduction, or wholesale pricing mechanisms.
• During implementation forums, PwC advised caution—many states are yet to develop feasibility studies or invest required capital to set up regulatory agencies.
• Without engineers, economists, legal analysts and tariff n + 3 experts, State regulators risk becoming rubber stamps—or worse, vehicles for political rent‑seeking.

Simply passing a law isn’t the same as running a functioning market

IV. Consumer and Tariff Inequality

The Electricity Act risks creating tariff inequality across state lines:

• With each state setting tariffs independently—some subsidizing, others cost‑reflecting—consumers in one border town could pay 60% more than their neighbor.
• There are no clear national guardrails: no standard subsidy policy, no mechanism to ensure lowest bands receive minimum access—even though Section 34 calls for inter‑state coordination.
• If high‑capacity industrial customers migrate to low‑tariff states, the fiscal load will fall on small //Band E// households, undermining equity.

The article glosses over that transparent, unified tariff design is not just a good idea—it’s essential for consumer protection and market integrity.

V. Investor Flight Risk: The Unspoken Worry

Experts warn that as early as late 2024:

• Dr. Idowu Oyebanjo argued that amendment attempts already created uncertainty—investors freeze when regulatory frameworks look unstable mid‑implementation.
• PwC and BusinessDay reports stressed that ambiguous rules across 36 regulators, unknown fees, and conflicting state laws make developers wary of committing capital.

Even the spectre of the Amendment Bill 2025—which FOCPEN itself called a “backdoor constitutional walk‑back”—is dampening investment interest.

VI. The National Grid Is Still the Weak Link

The article criticizes “centralized failures” in the grid—but states cannot fix the grid alone:

• Nigeria’s grid collapsed ten times in 2024 due to underinvestment, vandalism, and aging lines—impacting multiple regions simultaneously.
• Without national coordination, asset transfer disputes (e.g. spanning multiple states) could paralyze planning and delay upgrades.
• The Transmission Service Provider (TSP) and NISO now exist—but federal authorities are still the gatekeeper of interstate wheeling and generation dispatch. In effect, States are regulators, not grid operators.

If Enugu cuts a tariff low but the grid collapses downstream in Kaduna, customers pay—but the article fails to acknowledge how grid instability limits real State autonomy

VII. What Needs to Be Done: A Better Way Forward

Rather than celebratory rhetoric, Nigeria needs a more nuanced approach:

1. Create a national template for SERCs, with mandatory minimum standards and mirror Sections of NERC’s Metering, Theft, and Tariff Code.
2. Phase in decentralization slowly—only states that demonstrate readiness (financial plan, staffing, assets, analytics team) should assume regulation.
3. Adopt regional regulators or consortiums (e.g. North‑West pooling)—to preserve economies of scale while allowing local flexibility.
4. Harmonize wholesale pricing and cross‑border rules via NERC’s oversight of grid‑connected generators; prevent double licensing where investments cross state lines.
5. Activate the Power Consumer Assistance Fund (PCAF) before removing subsidies, to cushion vulnerable consumers—already named in the electricity law but still dormant.
6. Keep any amendment bill on hold until all State electricity laws are operational, with deep stakeholder consultation—not speeded legislation.

VIII. Conclusion

Nigeria’s Electricity Act 2023 holds potential. But without strong leadership from the Federal Ministry of Power, robust transition planning, and clear frameworks to manage state capacity gaps, we risk fragmented markets, higher electricity costs, and investor flight.

Real empowerment requires not just devolved authority, but shared standards, guidelines, and enforcement capacity. Otherwise, the Electricity Act 2023 may deepen the power chaos it was meant to fix.

Adetayo Adegbemle is an Executive Director of PowerUp Nigeria is a leading power sector advocacy organization championing universal access to sustainable energy and resilient infrastructure. Through policy engagement, community empowerment, and partnerships, we strive to eradicate energy poverty and drive equitable development nationwide.