Nigeria: The Iniquities Of The Electricity Act Of 2023 – South Vs. North, Rich Vs. Poor

By: Ike Ugorji

Some key recent events make it compelling to ponder the Electricity Law of 2023. These including the following:

I. The ongoing proposed Electricity Act (Amendment) Bill, 2025 currently undergoing deliberation in the National Assembly.

ii. The press release issued by the Forum of State Commissioners of Power and Energy in Nigeria (FOCPEN) on the 16th of July 2025 with concerns and opposition to key proposed amendments (signed on behalf of FOCPEN by the Commissioners of Power from Cross River and Benue respectively).

iii. The unilateral tariff adjustment by the Enugu Electricity Regulatory Commission (EERC) on the 18th of July 2025 and the subsequent furore raised by market Operators (mainly the Generating Companies – GENCOS and the Electricity Distribution Companies (DISCOS) across the value chain); and

iv. The subsequent statement issued by the Nigerian Electricity Regulatory Commission – NERC clarifying the delineation of State Regulatory powers Some experts have always posited that the Electricity Act of 2023 was solving a problem that didn’t exist. The major problem of the sector had and continues to have are mainly twofold:

I. Lack of Policy and Regulatory Consistency

ii. Lack of Investment

Both issues are co-related, as deficiencies in the former will always lead to deficiencies and a lack of appetite for the latter. So, rather than reinforce Regulatory and Policy consistency by strengthening the regulatory body the Nigerian Electricity Regulatory Commission (NERC), the National Assembly gave us a pill to solve the wrong headache, and a pill that we arguably, didn’t need.

The 2023 Law created the opportunity for a market of merely 5,000MW grid generated energy to have a potential to have 36 additional regulatory bodies (the country has >24,000MW of grid capable capacity and uses about 8,000MW of that capacity daily – including large off-grid generating plants like Dangote, NLNG).

Furthermore, Nigeria, that has a reputation in the power sector for lack of regulatory consistency (e.g. the lack of steady tariff reviews, the lack of activated PPAs for the majority of on-grid GENCOs more than a decade post privatization to mention a few), created a byzantine structure that is making both local and foreign investors very jittery about putting their resources into the Nigerian electricity sector.

So, in one fell swoop, the 2023 Regulatory Law created more Regulatory and Policy inconsistency and further drove away investment, because of the lack of clarity and the fear of the unknown.

Some of the proponents of the Act at the time of its passing were essentially angling at self-serving commercial benefits that were thought could be derived from further cannibalizing an already challenged market.

A former public servant with significant experience in the power sector once said, “We are transferring responsibilities that the Federal Government with more capability and capacity has thus far has struggled to implement to sub nationals which may have less capability and capacity, what do you think the outcome will be?”.

4. The other aspect is that the act was unnecessary if the intent was mainly to encourage State participation (particularly in investment, which is more important).

5. ⁠Everything the proponents claimed that the States could do after the Act was passed, could have been done with the prior EPSRA. For example, if a State Government wanted to meter all its citizens, it could have simply created an investment agreement with the DISCO in charge of the State’s franchise.

If a State Government wanted to build power plants, it could simply, build the power plants and sign a PPA with the DISCO in charge of the State’s franchise. Every single example that you could think of for a State to participate in the Electricity Value Chain, was already available to the State’s through the EPSRA as it is through the 2023 Electricity Law. The fundamental flaw of the 2023 Electricity Law is that it is trying to solve the wrong problem.

5. If the Electricity Act hadn’t been passed so hurriedly during the transition from the9th to the 10th assembly, the discerning would have noticed that the market was on a path to workability. Despite all the commentary of the failures and successes of the past
administration, it is clear, the Nigerian Electricity Supply Industry (NESI) policy reform, was a strong point. The sector was on an upswing.

As of May 2023, the electricity subsidy had been substantially removed through small incremental increases in tariff over 3 years, where all successive scheduled tariff reviews were implemented on time (Policy and Regulatory consistency). 8 out of the 11 DISCOs had been transitioned to new more capable owners, including the advent of more integrated Utilities where some GENCO owners rescued some of the failed DISCOs (Investment, for example Transcorp taking over Abuja DISCO and Mainstream taking over Yola DISCO).

Rising Inequities in the NESI caused by the 2023 Electricity Law.

6. The 2023 Electricity Law creates an inimical position where the most sacred and core tenant of the NESI as enshrined by the EPSRA – Cross Subsidization – was eroded, without being replaced or a new core tenant enshrined.

For instance, one of the ways the EPSRA was implemented was the geographical makeup of the Electricity DISCOs, where larger more economically viable States were combined with smaller States so that through Economies of Scale the DISCO cluster can achieve better tariff rates for all.

Furthermore, larger States had the ability to leverage the electricity infrastructure in smaller States in the Franchise Area to improve service delivery and create redundancy and security of supply.

Today, the new Electricity Law if fully implemented as envisaged, will create unnecessary barriers to cross sub-national border cooperation on electricity. Smaller population States like Ebonyi, Zamfara, Jigawa, Ekiti, Gombe etc. will invariably experience higher rates of electricity. Some smaller States believe they will become fully independent on supply but there are two questions they need to ask themselves that will catch up to them sooner or later:

I. If the State seeks to industrialize, there will be a need for larger amounts of energy than those that can be achieved through small, inefficient Gas and Renewable power plants.

ii. If a small State generates excess energy, it could lose the ability of a ready market to sell excess energy to, due to all the barriers that are being placed by this new complicated regulatory regime.

7. Sub-national Resource Nationalism is a touchy subject in Nigeria. The Federal Government and Government of the Federation over the past 40 years has created power plants with the following make up:

80% of Southern States (14/17 States) have power plants with an installed capacity of >100MW and only 16% (3/19 States) of Northern States have power plants with an installed capacity of >100MW.

When we pass a Law that allows State Governments to take regulatory control of those assets, it is unfair and inequitable. What if Southern States regulate that the Power Plants built by funds from the Federal Government and Federation can only be used for the specific States that the Power Plants are domiciled in? You can imagine what will happen in that scenario.

For instance, Bayelsa State with an installed capacity of 240MW, has more installed capacity than the States of Borno, Yobe, Taraba, Gombe, Bauchi and Adamawa combined! Rivers has 8 (eight) times the installed capacity of Kano, Katsina, Jigawa, Kebbi, Sokoto, Zamfara and Kaduna.

It is therefore not a surprise that the leading voices of State Electricity regulatory control are Southern Power Commissioners that have taken control of FOCPEN. Northern States may need a different Solution.

For instance, Northen States may need regulatory partnerships to create bigger electricity markets so that resources in Niger and Kaduna that are base load generating (Gas and Hydro), can help balance the ambitions of the States in the far Northwest and Northeast that have ambitions to become powerhouses in Solar Generation. Smaller Southern States that have integrated supply, may not want to leave the bigger markets that anchor their commercial viability.

Where do we go from here?

8. States MUST realize that over-regulation is anti-investment. The NESI needs investment more than anything. As the States pass their respective Laws, Laws should focus on investment promotion and be light on regulation (the rules from NERC are more than sufficient to cover the States from a regulatory standpoint). States should only take over Regulatory matters from NERC that are necessary and specific.

9. The National Assembly in the amendments to the Electricity Law must create more equity in the Law and return provisions that give all Nigerians the chance to have affordable Electricity. For instance, to bolster the Power Consumer Assistance Fund (PCAF), there should be token penalties for large companies that go completely off-grid.

If the likes of the Nigerian Liquified Natural Gas Company (NLNG) and Dangote Refinery, continue to opt to take no power from the grid, they leave the grid with less heavy consumers and without economies of scale, costs are invariably higher for residential consumers and small and medium enterprises.

There could be a required offtake percentage of the total offtake requirement that allows an off-grid industrial user not to be penalized (this could bring much needed big companies to the grid). For example, Sasol in South Africa pushes all its large, generated power to the grids and buys cheaper power from the grid for its operations.

10. States that have small markets and those that have limited sources to generate energy should understand that there is strength in numbers. There should be provisions in the new Electricity Law that allow for States and regions to partner to create bigger Electricity Markets. It should also create opportunities for regional Transmission grids to allow for more integrated utilities.

Some Northern States are currently working to create Regulatory Frameworks that are interconnected to allow for joint action. The States that have been hitherto silent under the Nigerian Governors Forum (NGF) and FOCPEN, must speak up before it’s too late and the risks of inequity manifests.

11. The Law must ensure equity in the usage of electricity that is generated from power plants that were built by the Federal Government and Federation Assets. For example, NERC has ensured that the cheaper Hydro power from Kainji and Jebba is available to all DISCOs. There are rumours of plans to hand over some NDPHC assets built with Federation funds to State Governments without any payment, this will exacerbate inequities in the market.

Alternatively, the act could create a requirement for the Federal Government to also invest in Power Plants across the States that are disadvantaged before any State can take control of Federal Government or Federation built power plants.

12. It is not too late to right the wrongs of the 2023 Electricity Act, but the National Assembly must act with intent and clarity. It is a welcome development that the 2023 Law is being revisited. In all things, sometimes there is an overcorrection before an adjustment.

We pray for a country where all citizens will have access to affordable electricity, and we can leverage our strength in numbers for the betterment of all.

Source: https://energynewsafrica.com