President Bola Ahmed Tinubu has given his approval to the Electricity Act of 2023, which was initially ratified by lawmakers in July 2022. The enactment of the Electricity Act will supersede the existing Electricity and Power Sector Reform Act of 2005. Its primary purpose is to establish a comprehensive framework that will govern the Nigerian Electricity Supply Industry (NESI) in the post-privatisation phase and promote private sector investments within the sector.
The deregulation of Nigeria’s electricity generation, transmission, and distribution at the national level empowers states, corporations, and individuals to generate, transmit, and distribute electricity.
According to the Act, states have the authority to issue licenses to private investors, allowing them to operate mini-grids and power plants within their respective regions. However, the Act prohibits interstate and transnational distribution of electricity.
Other Provisions of the Electricity Act 2023
Under the provisions of the Electricity Act 2023, the Nigerian Electricity Regulatory Commission (NERC) will possess the ability to regulate the electricity sector within Nigeria. This regulatory power does not undermine the authority of the states to create electricity markets and legislate within their boundaries.
The Act also outlines the procedures through which NERC can transfer regulatory responsibilities to state regulators once they are established. Until a state enacts its own electricity market laws, NERC will continue to regulate all electricity-related activities conducted within that state.
At present, Lagos, Edo, and Kaduna states have already implemented electricity market laws and can commence regulating their respective markets. However, for states without such laws, NERC will assume regulatory control. NERC will still maintain cross-border regulations, overseeing the generation and transmission of electricity across different states.
Furthermore, the Act grants lawmakers the authority to oversee the Nigerian Electricity Supply Industry (NESI) through their respective Power Committees in the Senate and House of Representatives. This oversight responsibility will be exercised regardless of any supervisory powers held by government ministries over state-owned enterprises or other entities operating in the Nigerian electricity supply industry.
Under the Act, electricity generation license holders are required to meet renewable generation obligations as determined by NERC. Electricity generation companies will be compelled to either generate power from renewable energy sources, purchase renewable energy-generated power, or acquire instruments representing renewable energy generation.
Additionally, the Act mandates the imposition of renewable purchase obligations on distribution or supply license holders.
The Act also stipulates that any individual or entity may construct, own, or operate an electricity generation facility not exceeding 1 megawatt (MW) in total capacity at a single site. Similarly, an undertaking for electricity distribution with a capacity not exceeding 100 kilowatts (KW) in total capacity at a single site, or any other capacity as determined by NERC, can be established without requiring a license.