Are Nigeria’s sub-nationals tapping 2023 Electricity Act?

The Nigerian Electricity Regulatory Commission (NERC) has recently granted autonomy to six additional states in Nigeria, allowing them to regulate the electricity markets within their borders. This move, part of the Electricity Act Amendment Bill of 2024 signed into law by the president, marks a significant step towards decentralizing the power sector and attracting private investment. States such as Enugu, Ekiti, Ondo, Imo, Oyo, Delta, Ogun, and Edo are among those that have been given the green light to license private investors to operate mini grids and independent power plants. Meanwhile, Lagos state, a key player in the Nigerian power landscape, has expressed interest in inviting investors for its planned Independent Power plants, signaling a promising future for the sector. Oti Ikomi, the CEO of Proton Energy, shared valuable insights on the progress and challenges in a recent interview with CNBC Africa. Ikomi highlighted the positive impact of the 2024 Electricity Act Amendment, which enables states to license generation, transmission, and distribution activities within their jurisdictions. While some states have already begun this process, there are challenges to overcome, such as establishing the necessary legal and technical infrastructure to support the new regulatory framework. Companies like Ibadan Distribution Company, operating in multiple states, face the task of separating assets and operations accordingly. Despite these hurdles, the initiative paves the way for states like Lagos to pursue ambitious plans for increasing power generation capacity. In the case of Lagos, the state aims to create 2,000 megawatts of power through gas-fired production, a substantial addition to Nigeria's current capacity of 5,000 megawatts. The 'Clean Lagos Electricity Initiative' seeks to establish four power hubs, each generating 500 megawatts, as part of the state's commitment to enhancing energy access and reliability. This initiative aligns with previous efforts focused on renewable energy sources like wind and solar, demonstrating a multi-faceted approach to power generation and sustainability. When discussing the timeline for implementing these projects and attracting funding, Ikomi emphasized the complexity and time-intensive nature of the power sector. While renewable projects like solar-based mini-grids may be completed within a year or two, gas-fired projects typically require several years to develop. Private investors evaluating opportunities in the Nigerian electricity market are looking for policy consistency, regulatory stability, and assurance of returns on their investments. The importance of a conducive business environment and adherence to the rule of law cannot be overstated in attracting and retaining private capital. As Nigeria navigates its energy transition and seeks to expand its power infrastructure, the role of private investors will be crucial in driving innovation and efficiency in the sector. Despite past challenges faced by investors in the power privatization exercise, there is growing optimism surrounding the current regulatory landscape and opportunities for private participation. With a strategic focus on sustainability, governance, and economic viability, the Nigerian electricity sector is poised for growth and transformation.