Nigeria's electricity sector has been plagued with challenges across the various subsectors, despite years of structural reforms and investments aimed at addressing these recurrent issues. Power supply has been epileptic, with frequent national grid collapses and blackouts. The sector has also been plagued with liquidity, profitability challenges and high indebtedness.

On 8 June 2023, His Excellency, President Bola Ahmed Tinubu, GCFR, signed the Electricity Bill 2023 into law as Electricity Act, 2023 ("the Act"). The Act provides a comprehensive legal and institutional framework for the operation of a fully privatized, cost and service reflective tariff, contract and rule-based competitive electricity market in Nigeria, and repeals the following Acts:

  1. Electric Power Sector Reform Act, 2005.
  2. Hydroelectric Power Producing Areas Development Commission (Establishment, Etc.) Act, No. 7, 2010.
  3. Hydroelectric Power Producing Areas Development Commission {Establishment, Etc.) Act, 2010 (Amendment) Act, 2013.
  4. Hydroelectric Power Producing Areas Development Commission (Establishment, Etc.) Act, 2010 (Amendment) Act, 2018.
  5. The Nigerian Electricity Management Services Agency (Establishment) Act, 2015.

The Act also consolidates laws relating to the Nigerian Electricity Supply Industry (NESI) with the aim of reforming the electricity sector, integrating renewable energy into Nigeria's energy mix, and attracting the required investments to develop the industry.

A key objective of the Act, amongst other, is to introduce new policies and regulatory measures that will address some of the current challenges and attract private sector investments across the NESI value chain to achieve a self-sustaining, profitable, and sufficient industry.

This publication highlights some of the key provisions of the Act and its impact on the Nigerian electricity sector.


Objectives, Application, and Scope of the Act

The principal objective of the Act is to consolidate all laws in the power sector and provide a comprehensive framework to guide the operations of sector. The Act also aims to:

  1. provide a suitable legal framework to accelerate growth in power generation capacity and improve utilization of generated power through increased investments in new and existing resources for power generation;
  2. promote policy and regulatory measures to ensure the expansion of efficient power generation, transmission, and distribution capabilities in Nigeria. This should address the imbalance in the existing transmission infrastructure and help to achieve Nigeria's national electricity access targets and highest per capita power consumption in Africa;
  3. provide clear guide and legal basis for a phase-wide development of the NESI since the conclusion of the privatization phase as implemented pursuant to the provisions of the repealed Electric Power Sector Reform Act;
  4. stimulate policy measures that will eliminate barriers to, and attract, investments across the Nigerian electricity value chain while promoting the development of a competitive electricity market;
  5. provide a clear legal and institutional framework for the formulation and adoption of a NIEPSIP;
  6. stimulate policies to attract sustainable investments in new and efficient power generation technology and revamping existing power plants to address technology limitation and outdated infrastructure that are responsible for value chain losses in the NESI;
  7. provide a framework to stimulate the development and utilization of renewable energy sources and create an enabling environment to attract investment in renewable energy sources;
  8. using policy and regulatory measures to eliminate barriers to investments in generation, transmission, distribution, and related sub-sectors in the NESI;
  9. provide a framework to improve access to electricity in rural, unserved, underserved, peri-urban and urban areas using conventional sources and renewable energy off-grid and mini-grid solutions;
  10. promote indigenous capacity in technology for renewable energy sources through a framework for local content in the NESI; and
  11. enact laws for the security of electricity infrastructure, with effective punitive measures against electricity theft and other offences peculiar to the NESI; and strengthen the relationship between federal and state electricity markets.
  12. Strengthen the relationship between the Federal and State electricity markets.

The Act shall apply throughout the Federal Republic of Nigeria and covers all aspects and segments of the power sector value chain in the country. However, the provisions of the Act will not preclude States from enacting laws to address generation, transmission and distribution of electricity within the States, sanction joint collaboration with the Federal Government, Local Government and organised private sectors to facilitate electrification of areas not covered by the national grid within the States, or establish State Electricity Market, State Integrated Electricity Policy and Strategic Implementation Plan (SIEPSIP), and State Electricity Regulatory Authority with powers to regulate the State's electricity markets.

Further, Section 3 of the Act provides that the Federal Government (FG) through the Ministry in charge of power shall prepare and publish the NIEPSIP in the Federal Gazette within a year of commencement of the Act. This will be done in consultation with the relevant government agencies and stakeholders and must be reviewed as required, but not later than every five years. The NIEPSIP is expected to guide the development of Nigeria's electric of existing and potential energy sources, and provide guidance on key matters such as rural electrification, public-private partnerships for provision of electricity access to all areas in the country, power-source specific policies, bulk purchase of power, management of local distribution in rural areas and other aspects of the power sector that the FG may deem fit for guidance through policy direction.

Finally, the Act provides that the NERC will have the continuing responsibility to ensure the development of the Nigerian electricity market from its current transitional electricity market stage to the medium-term and long-term electricity market stages or such stages of the market in accordance with such terms, preconditions or features as may be prescribed in the market rules or amendment to such rules as may be approved by NERC.

The objectives set out in the Act are commendable as the NESI needs creative and innovative solutions to address the country's power supply problem. The introduction of a consolidated power framework that includes cleaner renewable energy sources in Nigeria's energy mix should facilitate the development and scaling of renewable energy solutions, introduce cutting-edge technology to improve power distribution and monitoring and encourage private sector investment. The proposed reforms are expected to improve the competitiveness, financial viability and service delivery in the sector.

Click here to continue reading . . .

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.