A Bolt Into The Future – Are The National Integrated Electricity Policy And The Integrated Electricity Plan 2024 The Fulcrum For Our Power Sector Transformation?

Introduction

The enactment of the Electricity Act 2023 (the "EA" or the "Act") now effectively incorporates Nigeria's federal system in the Nigerian Electricity Supply Industry ("NESI") in that, State Governments in Nigeria¹ now have the powers, subject to the EA², to establish and operate their own State electricity market.

The Act's primary objective is to establish a comprehensive framework that fosters private sector investments and provides a pathway towards consistent and reliable universal electricity access across the nation³. To guide this ambitious endeavour, the Federal Government through the Federal Ministry of Power, in December 2024, developed the National Integrated Electricity Policy (the "Electricity Policy"), and same was approved by the Federal Executive Council on the 6th of May 2025. The Electricity Policy is a comprehensive roadmap for all stakeholders, and it is intricately linked with the Nigeria Integrated Resource Plan (the "Integrated Resource Plan"), a crucial planning tool aimed at achieving energy objectives (set out in the Electricity Policy) in a strategic and cost-effective manner.

For investors, understanding the regulatory landscape, policy objectives, and long-term energy infrastructure plans is essential to identifying bankable projects and maximizing returns. This article explores the Act, the policy targets of the Electricity Policy, and how the Integrated Resource Plan interrogates available energy resources, forecasts demand and identifies investable opportunities which will lead up to the achievement of the policy targets set out in the Electricity Policy.

1. The Electricity Act and its Foundational Policy Objectives

The Act marks a pivotal shift in Nigeria's approach to power. The Act repeals the Electric Power Sector Reform Act 2005, the Nigerian Electricity Management Services Agency (NEMSA) Act 2015, and the Hydroelectric Power Producing Areas Development Commission (HYPADEC) Act 2010⁴ and addresses critical contemporary issues such as the devolution of regulatory powers to State governments, climate resilience and energy transition. A key feature of the Act is the de-monopolisation of the electricity market, empowering States to enact laws for electricity businesses within their territories. This has effectively transitioned Nigeria from a single, centrally regulated sector to a two-tier system comprising a National Wholesale Electricity Market (NWEM) and evolving State Electricity Markets (SEMs).

Underpinning the Act are core policy objectives that aim to address the long-standing challenges in the NESI . These objectives, further elaborated in the Electricity Policy, are centred on achieving healthy capitalization, universal access, and electricity reliability. These objectives serve as the guiding principles for the strategic direction of NESI and have informed the development of detailed implementation plans.

2. The National Integrated Electricity Policy 2024 and its Strategic Goals

The Electricity Policy represents a collective effort by the Federal Ministry of Power (the "Ministry") and various stakeholders to tackle the complex and long-standing issues within the NESI. It builds upon the foundations laid by the Act and outlines specific strategies, timelines, and stakeholder roles to achieve its policy targets.

The Integrated Resource Plan recognises the importance of both national and state-level planning in Nigeria's federal system. While State IRPs are a welcome development, the Electricity Policy and Integrated Resource Plan emphasise the need for compatibility and collaboration between national and state plans, potentially through a common data platform and shared software. The Electricity Policy also outlines the process for States to progressively take responsibility for regulating electricity businesses within the borders of their States.

The core objectives of the Electricity Policy are⁵:

1. Healthy Capitalization: This involves addressing outstanding debts within the NESI, strengthening payment discipline through robust enforcement and revenue assurance mechanisms, and securing sustainable cash flows via innovative financing, cost-reflective tariffs, and potential government support for critical infrastructure.
2. Universal Access: The Electricity Policy aims for universal electricity access, with an initial target of 30GW of power with 30% renewable energy by 2030. Recognising that a significant portion of the population currently lacks access, the Electricity Policy acknowledges the necessity of targeted Federal and State Government interventions to subsidise capital investments in infrastructure development. The Integrated Resource Plan suggests a more realistic timeline of 2035 for achieving this alongside the phase-out of self-generation through diesel and petroleum generating sets.
3. According to the Electricity Policy, Nigeria's generator set capacity currently stands at 45GW compared to 13GW of grid-connected power generation capacity (of which only ~4GW is delivered due to maintenance, system and fuel constraints).
4. Electricity Reliability: This objective focuses on ensuring the quality and consistent supply of electricity with adequate reserve margins. Strategies include enhancing access to natural gas supplies, promoting policy and regulatory collaboration, facilitating the exploitation of non-associated gas resources for power generation, and modernising and digitalising the transmission network to improve monitoring, control and resilience.

Beyond these primary objectives, the Electricity Policy outlines several other crucial policy recommendations aimed at enhancing the sector's performance. These include enhanced national and sub-national coordination, enabling community-level engagement, developing capacity-building programs, implementing fiscal incentives, fostering infrastructure and technology development, improving data management and transparency, and promoting cross-border electricity trading within the West African Power Pool. The Electricity Policy also emphasises the importance of integrating renewable energy sources into Nigeria's energy mix, aligning with the country's energy transition goals. The Integrated Resource Plan plays a critical role in this by providing a least-cost plan for the development of generation and transmission infrastructure, incorporating the Electricity Policy's policy targets and feeding into the Strategic Implementation Plan ("SIP").

3. The Nigerian Integrated Resource Plan 2024: The Investment Roadmap

The Integrated Resource Plan 2024 is described as a comprehensive approach to national power system planning. It integrates the assessment of Nigeria's energy resources on the supply side with opportunities for energy efficiency on the demand side. The ultimate goal of the Integrated Resource Plan is to derive a least-cost combination of supply and demand measures that supports national objectives such as energy security and access, social equity, decarbonization, and environmental sustainability.

Nigeria's electricity policy objectives, as outlined in the Electricity Policy, aim for healthy capitalization, universal access, and electricity reliability. The goal of universal electricity access by 2030 is a key commitment, focusing on providing affordable, reliable, and sustainable energy. However, the Integrated Resource Plan acknowledges that this target may be challenging, suggesting a more realistic timeline of 2035 for the phase-out of self-generation and achieving universal access.

While Electricity Policy 2025 sets the policy direction, the Integrated Resource Plan 2024 translates this into a detailed investment framework, specifying projected electricity demand and supply needs up to 2045, planned generation, transmission, and distribution investments and technology mix and grid expansion priorities. Much like the Integrated Resource Plan, there are also previously existing planning tools such as the Sustainable Energy for All's Integrated Energy Planning Tool⁶ which is a repository for investment-grade data on electrification pathways.

Key Features of the Integrated Resource Plan:

1. Addresses the National Power System Crisis: The development of the Integrated Resource Plan is considered imperative to tackle the existing challenges in Nigeria's power system, which hinder socio-economic development. This includes the low access rate to the national grid and frequent outages.
2. Plans for a Reliable and Least-Cost National Grid: The Integrated Resource Plan aims to establish a national grid of adequate size that provides reliable electricity at the lowest possible cost.
3. Incorporates Policy Targets: As specified in the Electricity Act 2023, the Integrated Resource Plan incorporates policy targets laid out in the Electricity Policy, such as the goal of achieving universal access to electricity.
4. Guides Investment Decisions: The Integrated Resource Plan provides a least-cost plan for the development of generation, transmission, and supply infrastructure required to meet current and future electricity demand. The outputs of the Integrated Resource Plan, in terms of the size and type of investments, feed into the SIP.
5. Facilitates Renewable Energy Integration: The Integrated Resource Plan considers Nigeria's renewable energy resources (hydro and solar) and aims to maximize their utilization to reduce reliance on self-generation and promote a cleaner energy mix. The Integrated Resource Plan scenario even exceeds the national renewable energy target of 30% by 2030, suggesting that more renewable generation is the least-cost option- 37% renewable energy share by 2030, increasing to 75% by 2045.
6. Investment in battery energy storage systems (BESS) for grid stability.
7. Eliminates Self-Generation: A key target of the Integrated Resource Plan is the phasing out of self-generation with generator set capacity at 45GW (more than 3x our installed generation capacity for grid-connected power), which is currently a significant but costly and polluting source of electricity. The plan anticipates this transition to be largely complete by 2035.
8. Considers Transmission Requirements: Although the initial version of the Integrated Resource Plan is based on a simplified zonal transmission model due to the ongoing development of the Transmission Company of Nigeria's (TCN) Transmission Master Plan, it acknowledges the critical role of network development in achieving a least-cost solution. Future iterations of the Integrated Resource Plan will be aligned with the Transmission Master Plan for a more comprehensive assessment of network needs.
9. Promotes Coordination: The Integrated Resource Plan emphasizes the need for coordination between national and state-level integrated resource planning. The intention is to have a common data platform and compatible software to ensure alignment between the National and State IRPs.

4. Investment Considerations and Potential Concerns

The evolving landscape of Nigeria's electricity sector, shaped by the Electricity Act 2023 and the Electricity Policy, presents both significant opportunities and potential concerns for investors. The de-monopolisation of the market and the emergence of State Electricity Markets offer new avenues for investment in generation, transmission, and distribution at both national and sub-national levels. The policy's emphasis on private sector participation and the creation of enabling environments through market rules, regulations, and incentives should attract both local and international capital.

However, investors should also be mindful of several key considerations:

1. Regional Opportunities: The zonal results of the Integrated Resource Plan scenario suggest different investment priorities across Nigeria's four zones. Northern zones (2 and 3) are highlighted as having strong potential for solar PV development, while the southern zones (1 and 4) are expected to see continued reliance on gas and the emergence of Gas and carbon capture, usage and storage. Hydropower development is also concentrated in specific zones. Investors can leverage these regional insights for targeted investments.
2. Storage Solutions: The increasing penetration of variable renewable energy like solar necessitates investments in energy storage solutions to ensure grid stability and reliability. The Integrated Resource Plan projects a significant increase in storage capacity by 2045.
3. Identification of Investment Needs: The Integrated Resource Plan outlines the projected significant growth in installed capacity required to meet the increasing demand and eliminate self-generation. It forecasts an increase from 11GW in 2024 to 111GW by 2045. This signifies substantial investment opportunities in generation technologies.
4. Technology Preferences: The Integrated Resource Plan's least-cost analysis indicates a growing role for renewable energy, particularly solar PV, which is projected to become a major component of the generation mix, especially in the northern regions. Investments in solar energy projects and associated storage solutions are likely to be attractive. The southern region is expected to continue relying on gas generation, increasingly combined with carbon capture, usage, and storage technologies. Hydropower also remains an important component.
5. The Transition to a Two-Tier Market: The shift from a single national market to a national wholesale electricity market and multiple state electricity markets introduces complexities in regulatory oversight and market operations. Investors need to closely monitor the development of State-level regulatory frameworks and the coordination mechanisms between NERC and State regulators.
6. State Electricity Market Viability: While SEMs offer potential, their success hinges on States' ability to develop credible market designs, establish effective regulatory commissions, and ensure payment assurance without relying on sovereign guarantees. The Electricity Policy encourages States to develop Integrated Resource Plans (IRPs) and demand studies to guide investment.
7. Transmission Infrastructure Bottlenecks: The Integrated Resource Plan highlights that only about half of the existing generation capacity is currently utilised due to transmission network limitations. Significant investments in transmission infrastructure and technology are crucial for the success of both the national wholesale electricity market and multiple state electricity markets. The Electricity Policy encourages private investment in transmission through licensing Independent Electricity Transmission Network (IETN) operators and acknowledges a high demand for new transmission lines, smart grid technologies, and metering solutions. The Integrated Resource Plan acknowledges the critical need for significant investment in transmission infrastructure to evacuate power from generation sources to demand centres and to strengthen inter-zonal connections, particularly north-south interconnectors. This presents opportunities for investment in transmission projects, including the potential for Independent Electricity Transmission Network (IETN) operators.
8. Renewable Energy Integration: While the Electricity ePolicy strongly promotes renewable energy, investors should assess the specific incentives, regulatory frameworks, and support mechanisms being put in place at both Federal and State levels to address technical and financial barriers to renewable energy integration.
9. Local Content Requirements: The emphasis on enhancing local content management may introduce specific requirements for investors regarding the utilization of Nigerian human and material resources, goods, and services. Compliance with these regulations, as monitored by NERC, will be essential.
10. Human Resource Capacity: The availability of a skilled workforce is critical for the sector's growth. Investors may need to consider the implications for workforce development and training initiatives outlined in the Electricity Policy.
11. Financial Viability and Tariff Structures: The long-term financial sustainability of the NESI depends on the implementation of cost-reflective tariffs and effective mechanisms for debt resolution. Investors will need clarity on tariff methodologies and revenue collection efficiency in both the national wholesale electricity market and multiple state electricity markets.
12. Policy Review and Regulatory Certainty: The Electricity Policy mandates periodic policy reviews. Investors should be aware of the potential for evolving regulations and the need for adaptability in their investment strategies.

Conclusion

In conclusion, Nigeria's power sector is at a transformative juncture. The Act and the Electricity Policy lay a foundation for a more competitive, reliable, and sustainable electricity supply industry. Nigeria's National Integrated Electricity Policy and Integrated Resource Plan 2024 signal a new era for energy investment. With a liberalised market, policy-backed renewable energy expansion, and a structured investment roadmap, Nigeria offers some of the most attractive energy sector opportunities in Africa.

For investors, this presents a landscape ripe with opportunities, particularly in the development of new generation capacity (including renewables), transmission and distribution infrastructure, and off-grid solutions. However, thorough due diligence, a clear understanding of the evolving regulatory landscape at both national and state levels, and careful consideration of the potential challenges are crucial for successful participation in Nigeria's power sector revolution. The integration of the Electricity Policy with the Integrated Resource Plan signifies a commitment to strategic planning and a coordinated approach, aiming to build a resilient and efficient electricity market that meets the diverse needs of Nigeria's population.

Footnotes

1. State Governments in Nigeria, 36 of them, are sub-national governments within Nigeria's federal system. State Governments may be referred to as "State(s)" in this article.

2. Section 230 of the Act

3. Section 1 of the Act

4. Section 231 of the Act

5. Chapter 2.1.3 of the NIEP

6. Nigeria Integrated Energy Planning Tool accessed at https://nigeria-iep.sdg7energyplanning.org/ on the 29th of March 2025 at 00:48

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.