The recent enactment of the Electricity Act 2023 has significantly transformed the power sector in Nigeria. A key part of the legislation is the decentralisation of the electricity market, allowing Nigeria’s subnational governments to regulate the sector in their respective jurisdictions.
Although there have been doubts over the capacity of the states to effectively carry out this responsibility, experts have urged that for state regulators to succeed, they must prioritise attracting investments over promoting regulations.
Speaking to BusinessDay, Adetayo Adegbemle, power sector analyst and Executive Director of PowerUp Nigeria, said the success of the electricity Act hinges on states designing regulations that attract investment, rather than pushing regulations and relying on state funds to build infrastructure.
Stressing the need for state governments to prioritise attracting investment over regulation, he contrasted the approach of Lagos State, which he said has focused on resource planning and securing investments before discussing regulation, with that of Enugu State, whose initial step was price regulation.
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”The decision that Lagos State is taking, will encourage more investment to go to Lagos and Lagos will continue to develop faster than others. So if a neighbouring state like Kogi State can now see how to wrap their own regulation around benefiting from Lagos, perfect. And if it is Lagos State that will end up exporting power to any other state after them, it is also good,” he said.
According to the Nigerian Electricity Regulatory Commission (NERC), 15 states have so far gotten their transfer order. Of these, 11 states have crossed the six-month transitional period, but only eight out of the eleven are currently operational.
Adegbemle speaking further, dismissed concerns about states lacking the resources to handle electricity markets, challenging the notion by asking how ready Nigeria itself was when the power sector reform began.
He emphasise that different models were already emerging. He highlighted the collaboration of Jigawa, Katsina, and Kano as one successful approach, contrasted with the path taken by Enugu State, which he noted has not seen much traction since its initial move.
”We have seen the model that Enugu took, and we can see that since they did that first move in August, in July, we have not seen any traction to date. So they should allow everybody to learn, everybody to evolve what works best in their situation. Since we said we are decentralizing this thing, we should know that there is no one-size-fits-all going forward.
”So some states will do well, some states will fail, and then some states will wait for those to fail so that they can gain from it. So the argument of whether states are ready or not is irrelevant at this point, because when Nigeria itself started the power sector reform, it was not as if the knowledge was there.
”You know, so allow everybody to do what they want to do. Some states will decide to still come together and follow the model that Kano, Katsina, and Jigawa is laying down. Some states will follow them,” he said.
Also speaking to BusinessDay, Lanre Elatuyi, power sector analyst said that developing workable regulation in states may take some time but the process should be encouraged.
Addressing the question of state capacity to fund infrastructure, Elatuyi emphasised that the point is not for states to generate or transmit or distribute electricity but for states to be able to attract the needed investment, the needed capacity, by creating the needed environment.
He also mentioned that states can leverage existing national transmission lines by paying the appropriate system use tariffs.
”The capacity for infrastructure now depends on how states are able to attract and how states can convince investors to come with infrastructure.
”And for another thing is that there are infrastructures that are all over, like all the transportation lines, states can still make use of those transportation lines and they will just pay whatever tariff, transportation use of systems tariff that needs to be paid. So the point is not for states to generate or transmit or distribute. It’s for states to be able to attract the needed investment, the needed capacity and the needed environment.
”If that regulatory environment is created and the idea structure is put there, then states can get the needed investors that they want to put in their money,” he said.
