Competitiveness of the Energy Sector in Nigeria: Decentralized Energy Options a solution to our Energy Crisis.

Competitiveness of the Energy Sector in Nigeria: Decentralized Energy Options a solution to our Energy Crisis.

By Omatseyin Fredrick Esq.

The Nigerian energy supply crisis refers to the present failure of the Nigerian power sector to provide adequate electricity supply to meet both domestic and industrial needs sufficient to support a rapidly growing economy like ours. Currently, only 45% of Nigeria’s population is connected to the national grid and due to this reason, a large percentage of the Nigerian population lack the energy needed to power both their domestic and industrial need.

Consequent on the foregoing, some statistics have shown that the average daily power supply in Nigeria is estimated at around four hours a day and this is not to even mention those days when there are complete power outages¹.

Power supply difficulties cripple the agricultural, industrial and mining sectors and impede Nigeria’s ongoing economic development. The energy supply crisis is complex, stems from a variety of issues and has been ongoing for decades. Most Nigerian businesses and households that can afford to do so rather run one or more diesel-fueled generators to supplement the epileptic power supply² as power cuts and restoration are not announced.

Since 2005, Nigerian power reforms have focused on privatizing the generation and distribution assets and encouraging private investment in the power sector, while the government continues to control transmission assets and in the same vein making modest progress in creating a regulatory environment attractive to foreign investors³.

The preamble to the Federal Competition and Consumer Protection Act, 2018 expresses the intention of the new legislation to promote fair, efficient and competitive markets in the Nigerian economy to facilitate access by all citizens to safe products and secure protection of rights for all consumers in Nigeria. The Act is aimed at opening up the Nigerian economy to competitive, innovative and secured solutions in the Nigerian business environment.

The concept of “Decentralized Energy Options [DEOPs]” centers on holistic approach to sustainable energy policy for the developing countries. It advocates decentralization of the governance structure, multiplication of the means of production, availability of affordable options and devolution of governance, control and management responsibilities. One major problem with the regulatory and governance frameworks of electricity in Nigeria and other countries in Sub-Saharan Africa is over-centralization of management responsibilities and administrative structures. Adoption of decentralized governance models have helped in repositioning the energy and natural resources sectors of several countries world over. The driving force varies from one country to another. In countries such as Kenya, the United Kingdom, and in Latin America, privatization of electricity has provided a means of attracting funds from the private sector to relieve the burden of inadequate government funding or subsidy in the electricity sector⁴.

Prior to the reforms, funding of the power sector has been centralized through a top-down funnel structure from the Federal Government like in Kenya and Nigeria.

The reform process in Kenya brought about a policy shift that aligns with the general trend of privatization and decentralization in the energy and other sectors to attract foreign capital and increase competition. However, in the case of Nigeria, while emphasis is placed on the need to liberalize the sector to stimulate private sector involvement; the governance structures and institutions put in place to manage the process would appear inadequate or improperly positioned to achieve desired objectives compared with what is obtainable in Kenya⁵.

In Kenya for example, the widespread introduction and adoption of renewable energy technologies is made national priority on virtually every national development policy agenda. No similar policy exists in Nigeria because the electricity regime in the country seems to place strong emphasis on revamping the old order under the defunct NEPA under the new PHCN and the regulatory frameworks provided by the NERC. The benefits of renewable energy and decentralized energy options have neither been articulated nor maximized in the current electricity regime in Nigeria unlike in Kenya⁶.

The availability of renewable energies or alternatives is vital to the provision of lowcost, affordable and regular electricity for industrial development, employment generation and poverty alleviation in Nigeria and other developing countries in Sub Saharan African. Renewable energies are a means of decentralizing the available energy sources or options in the country. If vigorously embarked upon, it would help Nigeria attain the much-desired national energy sufficiency as well as promote positive environmental consciousness and values⁷.

Renewable and decentralized energy options are not without challenges, but their positive effects outweigh attendant difficulties of adopting these options. For example, Kenya’s effort in renewable and decentralized energy options have been mixture of both; a story of a few successes amidst many failures. Kenya did also tread the path Nigeria is currently journeying in electricity. It had focused on urban electrification by relegating rural electrification to secondary importance. This is due to the notion that the rural people consume less electricity compared to urban dwellers which makes rural electrification even less profitable to investors. It also has its initial set-backs typical of developing countries as electrification was frequently used as reward for constituent support at electioneering. In some cases, projects often reflect haphazard and inefficient patterns that bear no relationship to local needs or ability to profit from grid connection. The licensing processes were also made cumbersome due to needless hurdles of bureaucracy and politics⁸.

The 1999 Constitution of the Federal Republic of Nigeria places electricity generation, transmission and distribution on the Concurrent Legislative List to enable all tiers of government to be involved in vital aspects of the electricity industry. The reality of electricity regulation in Nigeria clearly depicts the opposite.

The Renewable Electricity Policy of the Federal Government of Nigeria (Renewable Energy Policy) 2006 merely acknowledges that “renewable electricity offers cost effective, modular and decentralized options for extending electricity and stimulating sustainable development in rural areas”. The Federal Government of Nigeria hopes to “… develop innovative, cost-effective and practical measures to accelerate access to electricity services in rural areas through renewable sources…”

The strategy of the Federal Government in this regard does not involve direct engagement with the local people through their respective Local Governments Councils. For the renewable policy to be effective, the imperative of decentralized, participatory energy strategy like DEOPs cannot be overemphasized⁹.

The rural electricity initiative though laudable, is alienating and remote from the local end users. The intention of the Government is to promote the role of the private sector in the delivery of rural electrification vide renewable sources through the support of entrepreneurship, training, marketing, feasibility studies, business planning, management, financing, and connection to banks and relevant institutions. This approach also includes integrating renewable electricity provision with other services, including water, telecommunication, fertilizers, pumps, generators, batteries, kerosene, LPG, electronics. However, the institutional framework to bring these into fruition is lacking or improperly positioned to achieve stated policy objectives. For example, the sources of funds for the renewable energy policy is also top-down. The designated fund, Renewable Electricity Trust Fund, is a proportion of the federally-controlled Rural Electrification Fund as may be determined by the Minister in addition to other donations, gifts and loans dedicated to renewable electricity from local and international sources. Access to the designated fund is also frustrated by bureaucratic and other needless administrative bottlenecks that make it difficult for timely release of funds for intended purposes¹⁰.

The greatest undoing of this policy direction might be its disengagement with the local people and their respective Local Government Councils. The Local Government-based systems of natural resources and energy governance have proved remarkably successful in some countries. This is because state-centric, (over)centralized models create apathy at the level of the local end users.

Decentralized approach to energy resource management is suggested for Nigeria being a practical and functional approach to energy sustainability. It involves the transfer of responsibility for planning, management and allocation of resources from the central government and its agencies to units and agencies at the state or local government levels. Functional approach to decentralization of electricity management responsibilities will also help in mitigating the negative impacts of remoteness of the central government of Nigeria from the local communities.

Against this backdrop, the electricity governance regimes in Nigeria would need to reflect the three-tier planning model in line with the political structure of the country. This necessarily makes it expedient to enhance the roles being played by the 774 local government councils of the Nigerian federation. The Local Government structure is crucial to the implementation of decentralized electricity governance systems in Nigeria being closest to the local or indigenous communities¹¹.


This article is for information purposes and is not intended as a legal opinion or advice on any issue. Therefore, any usage of this article must be with the proper legal guidance as the position of the law may have changed.

1 Wikipedia

2 ibid

3 ibid

4 Y.Oke’, ‘Beyond Power Sector Reforms: The Need for Decentralised Energy Option (‘DEOPs’) for Electricity Governance in Nigeria’< > Accessed on 11th December, 2022

5  Ibid p2.

6  Ibid p2.

7 Ibid p2.

8 Ibid p2.

9 Ibid p2.

10 Ibid p2.

11 Ibid p2.