State governments in Nigeria are now preparing to adopt and implement the provisions of the Electricity Act 2023. This bill was signed into law in early June 2023 by President Tinubu to handle the framework of the post-privatization phase of the Nigerian Electricity Supply Industry (NESI). Earlier in March, former president, Muhammadu Buhari, had signed into law the constitutional amendment allowing states in the country to license, generate, transmit, and distribute electricity. Before that bill was signed, what was operational was the Electric Power Sector Reform Act 2005, which put its supply on the exclusive list of what the Federal Government would handle.
However, this new law signed by Tinubu has opened up some aspects of the sector to the Nigerian Electricity Regulatory Commission (NERC). The act enables states, companies and individuals to produce, transmit and distribute it, promoting empowerment in the energy sector. As well, it mandates the NERC to regulate the sector but also transit regulatory duties to states who have adopted the federal bill and established their own regulatory commissions. Power-generating companies must also generate power from renewable energy sources, purchase power generated from renewable energy or procure any instrument representing renewable energy generation.
Households cannot exceed a certain limit of payment for tariff.
In this light, the NERC urged state governments to target industrial consumers in order to get value for the power generated. According to the commission, the country has a very high level of illiquidity in the NESI. The reason is that households consume about 68 percent of energy distributed from the national grid, but there is a limit to what household consumers can spend on tariffs. Even if there is an increase in supply or the rate of tariff, the limitation cannot be avoided.
Stakeholders have called for increased investment in renewable energy as well as energy efficiency in the country, in order to promote the development of the sector as mandated by the new bill. This call was made at the 2023 International Conference of the Renewable Energy and Energy Efficiency Associations-Alliance (REEEA-A) in Abuja. The conference, which was organized in collaboration with the Nigerian Energy Support Programme (NESP), the European Union (EU) and the German government, had various panel discussions by experts in the sector.
More supply to industries means more productivity.
Speaking at the conference, NERC’s commissioner, Planning Research and Statistics, Dr. Yusuf Ali, who was represented by Abdulsalami Yusu, lamented the illiquidity in the sector and stressed that energy supply is a factor of the fund that can pay for it. He maintained that the country or even state governments cannot boost supply while supplying only households. He insisted that supplies cannot be boosted if every entity is supplying only households. According to him, the level of consumption at homes cannot rival that of the industrial sector. “There is a limit that when you increase tariffs or when you increase supply they can’t pay more than that,” he said.
On the other hand, when industrial customers consume it, it culminates in additional production and creation of wealth that can pay for the energy supplied. This will impact the electricity value chain. The commission noted that electricity supplied to industrial customers is more viable than the one supplied to household customers. According to Yusuf, the more power industries consume, the more they produce and the more money they make to be able to pay for it. This way, it is more viable in the sector and there is actual turnover. He urged states to use the new law as a gamechanger to create industrial clusters and feed them with power.
Renewable energy can solve energy issues in Nigeria.
At the event, Germany ambassador to Nigeria, Ms. Annett Gunther, said that it was necessary for the government and the private sector to find the right way to implement the energy transition plan. She said that Germany would continue to support Nigeria as the country works towards its energy transition plan, the end goal of which is to achieve net zero carbon emissions in generation. Also speaking, the chairman of the Board of Trustees of REEEA-A, Prof. Abubakar Sambo, said that with appropriate political will, renewable energy would solve the electricity problems in the country. Given the country’s massive energy deficit (the highest in the world), the Federal Government said that it is contemplating a Renewable Energy plan (REmap) that would generate 178,000 megawatts in its bid to overhaul Nigeria’s energy architecture.