Key Highlights of Nigeria’s 2023 Electricity Act.
President Bola Tinubu has given his approval to the recently passed Electricity Act, marking a significant update to the 2005 Electricity and Power Sector Reform Act in Nigeria.
Originally enacted in July 2022 during former President Muhammadu Buhari’s administration, the new legislation aims to stimulate private sector investments in the country’s power sector and break the monopoly in electricity generation, transmission, and distribution on a national level.
Outlined below are ten key advantages brought about by the assented 2023 Electricity Act:
1. Removal of the licensing requirement: Individuals and entities are now permitted to construct, own, or operate electricity generation projects with a capacity of up to one megawatt or distribution projects with a capacity of up to 100 kilowatts, without needing a license.
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2. Renewable generation obligations: Electricity generation licensees are now obligated to meet prescribed renewable generation targets set by the Nigerian Electricity Regulatory Commission.
3. Emphasis on renewable energy sources: Power generation companies will be compelled to generate electricity from renewable energy sources, purchase power generated from renewable energy, or acquire instruments representing renewable energy generation.
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4. Strengthened oversight: Legislative bodies, through their respective Committees on Power in the Senate and House of Representatives, are granted the authority to exercise oversight and regulatory functions over the Nigerian Electricity Supply Industry (NESI).
5. Empowerment of states, companies, and individuals: The Act grants the ability for states, companies, and individuals to generate, transmit, and distribute electricity.
6. State-level regulation: States now have the power to regulate their own electricity markets by issuing licenses to private investors, enabling them to operate mini-grids and power plants within their jurisdiction. However, the Act prohibits interstate and transnational electricity distribution.
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7. Strengthened regulatory authority: The Nigerian Electricity Regulatory Commission (NERC) is empowered to regulate the electricity sector within Nigeria, ensuring fair practices and efficient operations.
8. Transition of regulatory responsibilities: NERC has the authority to transition regulatory responsibilities to state regulators once they are established, promoting decentralization and efficiency.
9. Continued regulation in states without electricity market laws: Until a state enacts its own electricity market laws, NERC will continue to regulate electricity businesses operating within that state.
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10. Limited market regulation: Presently, only three states—Lagos, Edo, and Kaduna—have enacted electricity market laws and can commence regulating their electricity markets. For other states without such laws, NERC will oversee their electricity generation and transmission activities.
The approval of the 2023 Electricity Act marks a significant step forward in Nigeria’s power sector, creating a more inclusive and competitive environment while promoting renewable energy generation. With the implementation of this new legislation, it is expected that private investments will increase, leading to improved electricity access and reliability across the country.
