The Nigerian Electricity Act, 2023: Innovations and Potential Opportunities for Investors in the National Electricity Supply Industry

The Nigerian Electricity Act, 2023: Innovations and Potential Opportunities for Investors in the National Electricity Supply Industry

By Jeremiah E. Aneji


The Electricity Act 2023, which was recently passed into law has been lauded by many as the re-affirmation of Nigeria’s drive towards attaining some measure of reform geared toward solving the perennial energy challenges she has been bedeviled with. The Act which repealed the erstwhile Electricity Reform Act of 2005, was enacted in keeping with the reforms already witnessed in the recently signed Bill No. 33 Devolution of Power (National Grid System) of the 5th Alteration of the 1999 Constitution as Amended into law. This removed electricity on the concurrent list, affording state governments the
opportunities to create their independent policy framework for electricity reforms in their respective states including the power to regulate the sector. I have discussed this in my previous article on this subject.

The Electricity Act, 2023 consolidates the laws relating to the Nigerian Electricity Industry by providing the legal and institutional framework for the power sector in Nigeria in the areas of electricity generation, transmission, system operations, distribution, supply, trading and the enforcement of consumer rights and obligations. It also provides for a holistic integrated resource plan and policy that recognise all sources for the generation, transmission and distribution of electricity, including the integration of renewable energy to Nigeria’s energy mix and to attract investments.

Our focus at this time is to evaluate the reforms encapsulated in the Act and the investment opportunities now made available to potential investors in the sector, the long terms benefits for the Nigerian Electricity Industry and the economy as a whole. To do this we would start by highlighting the laudable reforms provided for under the Act, the investment opportunities that has be made available on the account of these reforms and recommendations to sustain such projections and investment drive.
1. The Reforms provided for under the Electricity Act, 2023.
2. The projections/investment opportunities on account of the Reforms in the Sector

1. Laudable Reforms Under the Electricity Act, 2023.

For one to really appreciate the reforms encapsulated in the newly signed Electricity Act, he/she must have had an idea of the current state of electricity supply in the country, primarily which led to the unbundling of the Power Holding Company of Nigeria into three independent facets, each of which would be responsible for the generation, transmission and distribution of power. The distribution sector of this unbundled company was privatized while the Federal Government had a tight rein on the generation and transmission sector of the industry.

It should be noted that despite this move, the Nigerian electricity supply industry has continued to experience numerous challenges related to electricity policy enforcement, regulatory uncertainty, gas supply, transmission system constraints, and major power sector planning shortfalls that have kept the sector from reaching commercial viability. The Center for the Studies of the Economies of Africa (CSEA) in its Nigeria Electricity Supply Industry (NESI)ᶦ report identified several challenges that has crippled the Nigerian electricity sector, some of which are:
i. Infrastructure Constraints
ii. Insufficient End-User Tariffs/Pricing
iii. Inability to Reduce Aggregate Technical, Commercial and Collection (ATC&C) Losses:
iv. Debts, Electricity Theft, and Non-payment Culture of the Public
v. Sector governance

The government and other key players in the industry came to a consensus on the need for drastic reforms that would further open up the sector to private investment and in such a liberalized regime that would allow for private individuals and municipal authorities to participate actively in the generation, transmission and distribution sector, without resort to a centralized/nationalized grid system (as was the case before the reform). The primary focus was to decentralized the power system to allow the municipal authorities ᶦᶦ churn out policies backed up with licenses to encourage private investors and undertakings to participate in all sectors of the industry, whether in small or large scale, including investment in renewable energy sources.ᶦᶦᶦ

Highlight of the Reforms in the Electricity Act, 2023.

As already mentioned in the introductory phase of this work, the Act introduced lots of reforms which are basically geared towards a liberalization of the sector, and provide a ready framework for investors to venture into power generation and distribution, especially in renewable energy and other sources. This also includes the commercialization of these products to encourage growth and healthy competition. Below are the highpoints of these reforms;

A. The Decentralization of the Power Sector

One of the notable reforms that was introduced by the Electricity Act is the decentralization of the entire power sector value chain giving rise to the creation of state electricity markets. This was done in furtherance of the constitutional amendment that enable the states of the federation to legislate on the power sector.ᶦᵛ

The direct implication of this stride is that the State Governments can set up regulatory guidelines/road map for electricity supply in their respective states.ᵛ This will include the issuance of license to operators/investors who want to engage in the generation, transmission and distribution of electricity within the states at any commercial value and quantity. According to DAYO, “By the combined effect of the provisions of sections 2(2), 63(1), 230 (2 – 9) of the EA 2023, the federating states of the Federal Republic of Nigeria are now empowered to create their electricity market, establish their state regulatory boards to oversee electricity activities within their jurisdiction.” ᵛᶦ

The decentralization of the sector and creation of State electricity markets is a transformative development in the NESI as this will improve energy access, delivery, and supply of electricity to citizens within a state, ensure less reliance on the national grid and effectively capture the unserved and underserved areas in the states.

B. The Transition from National Electricity Regulatory Commission to State Regulators.

This Act serves as a transitional tool to further pronounce in clear terms the delisting of the exclusive powers of the Federal Authority to legislate or make policies on the power sector. It makes for two regulatory regimes, one that would see the full application of this Act and the Regulatory cover of the regulators created under the Act, and the other would apply to states that have enacts their state electricity law and set up their regulator. These states will go through a transitional process whereby regulatory authority for all electricity related activities carried on intra-state level will be transferred from the NERC to the state regulator. The regulatory transition process begins once the NERC is notified of the establishing of a state’s electricity law and regulator. Within 45 days of receipt of the notification, NERC must issue a draft order containing a transition plan for transferring regulatory responsibility to the state regulator.ᵛᶦᶦ

C. Administrative/Governance Structure of the Nigeria Electricity Supply Industry

The Electricity Act 2023 reinforce the creation of two parallel regulatory regimes. The first applies nationwide on the States that are yet to enact their state electricity laws and establish state regulators, while some aspects shall apply in general terms as regards to national policiesᵛᶦᶦᶦ. These States will remain under the regulatory authority of the NERC till when such states enact their state electricity law and set up their state regulator.ᶦᶦˣ

Generally, the Act provides for the following bodies to administer and play specific roles in ensuring the NESI maximize the actualization the desired objectives set out in the Act;

I. The National Electricity Regulatory Commission – The Act provides for the Establishment of the National Electricity Regulatory Commission as the apex body in the NESI. ˣ The Commission is mandated to create, promote, and preserve efficient electricity industry and market structures, and to ensure the optimal utilization of resources for the provision of electricity services; maximize access to electricity services, by promoting and facilitating consumer connections to distribution systems in both rural and urban areas etc. ˣᶦ The Commission’s mandate is broad and extends to the establishment of Consumer Rights and Obligations in the use of electricity, amend or create market rules and further extends to the issuance of licenses for the generation, transmission, and distribution licenses in the NESI.ˣᶦᶦ

II. National Hydroelectric Power Producing Areas Development Commission – The Act establishes the National Hydroelectric Power Producing Areas Development Commission (N-HYPPADEC) which shall be responsible for formulating policies and guidelines for the development of hydroelectric power producing areas, without prejudice to the powers of the Minister to issue policy directives and the NERC’s power to regulate the NESI. The N-HYPPADEC is charged with the responsibility to formulate policies and guidelines for the development of hydroelectric power producing areas without prejudice to the powers of the Minister to issue policy directives and the Nigerian Electricity Regulatory Commission’s power to regulate the electricity supply industry and to conceive, plan and implement, in accordance with set rules, projects and programmes for the development of hydroelectric power producing areas.

III. Rural Electrification Agency – The Act created the Rural Electrification Agency to create an enabling channel for entry into markets for rural, unserved and underserved electrification services, and to coordinate corporate bodies wishing to supply such services and facilities.ˣᶦᶦᶦ In the discharge of its functions, the Agency shall consult, from time to time, such persons or groups of persons who may or are likely to be affected by its projects or programmes, including, but not limited to investors or renewable energy companies, renewable energy user cooperatives, State Rural Electrification Boards, interested parties and other stakeholders ˣᶦᵛ

IV. Nigerian Electricity Management Services Agency – The Act provides for the establishment of the Nigerian Electricity Management Services Agency (NEMSA).ˣᵛ This Agency is charged with enforcing all statutory technical electrical standards and regulations as published by the Commission and all other relevant statutory bodies, in collaboration with Standards Organization of Nigeria and other relevant Government Agencies so as to ensure that all major electrical materials and equipment used in Nigeria are of the right quality and standards, amongst its many other mandates ˣᵛᶦ

V. National Power Training Institute of Nigeria – The Act established an Institute to be known as the National Power Training Institute of Nigeria ˣᵛᶦᶦ with focal point on human resource development and workforce capacity building. This Institute would offer engineering, technical and other
training/certificate programmes in collaboration with both foreign and local institutes for professionals and practitioners in the power sector and serve as a
pupillage centre and finishing school for graduates of engineering. ˣᵛᶦᶦᶦ

D. Integrated National Electricity Policy And Strategic Implementation Plan

The Act provides that “the Federal Government through the Ministry in charge of Power shall, within one year from the commencement of this Bill, initiate the process for the preparation and publication in the Federal Gazette, an Integrated National Electricity Policy and Strategic Implementation Plan in consultation with relevant Government Authorities and other stakeholders to guide the overall development of the electric power sector in Nigeria.”ˣᶦˣ

The Plan is set to focus on the development of the electric power sector based on optimal utilization of a combination of renewable and non-renewable energy sources; mini-grids or stand-alone systems in rural areas, rural electrification and for bulk purchase of power and local power distribution; public-private partnerships; policies including waivers and subsidies to promote renewable energy, among others

E. The Creation of New Licences

The Act regulates the issuance of licenses for the business of electricity generation (excluding captive generation), electricity transmission, distribution, supply, trading, and system operation. Section 63(1) precludes the construction, ownership or operation of any of the above undertakings without an appropriate licence. However, Section 63(2) of the Act allows a person to construct, own or operate an undertaking for generating electricity not exceeding 1 megawatt (MW) in aggregate at a site or an undertaking for distribution for electricity with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, or such other capacity as the Commission may determine occasionally.ˣˣ

The Act provides for the following licences to private undertaking in furtherance of the drive for private participation in the industry:
i. The Generation Licenses – A generation license allows the licensee to construct, own, operate and maintain a generation station for purposes of
generation and supply of electricity.ˣˣᶦ
ii. Transmission Licenses – A transmission license authorizes the licensee to construct, maintain, and operate a smart grid interconnection in Nigeria.
iii. The System Operation Licence (ISO) ˣˣᶦᶦ – The Licencee shall engage in generation scheduling, commitment and dispatch; in the transmission
scheduling and generation outage co-ordination; in transmission congestion management etc. ˣˣᶦᶦᶦ The Act also made for a transition of certain powers of the Transmission Company of Nigeria Plc to an Independent System Operator (ISO) ˣˣᶦᵛ.
iv. The distribution and supply licence (DSL) ˣˣᵛ – This licence enable the dealer to effect connection of customers to receive electricity supply; installation, maintenance and reading of meters, billing and collection; expansion of the distribution network within the licensed areas ˣˣᵛᶦ
v. Trading Licenses – Section 69 of the Act provides for the issuance a trading licensee shall be permitted to engage in the purchasing, selling, and trading of electricity and the Commission shall have the powers to determine the terms and conditions of trading licenses as may be appropriate in the circumstances, and having due regard to the nature of the activities in which the licensee intends to engage ˣˣᵛᶦᶦ

F. Criminalization Of Electricity Theft

As already pointed out in the introductory part of this work, one of the factors responsible for the near failure and abysmal performance of the distribution chain of the NESI are the illegal activities carried out by the unpatriotic on electricity installations and infrastructures. This Act, expressly criminalizes all acts of electricity theft, theft of electricity lines, receiving of stolen electricity, illegal meter tampering/bypass, and willful damage to electricity Infrastructure. ˣˣᵛᶦᶦᶦ

The fine for these offences ranges from prison terms to fines of up to 500,000 naira.

G. Subsidies and Incentives for Renewable Energies

The Act promotes the embedded generation, hybridized generation, co-generation, and the generation of electricity from renewable sources such as solar energy, wind, small hydro, biomass, and other defined renewable sources.ˣˣᶦˣ


The restructuring of the Nigerian Power Sector coupled with the reforms embedded in the Act, the opportunities for avenues to invest with promising returns and minimal risk is now much more available than under the previous regime. I would summarily list them as follows:
A. Creation Of State Electricity Markets – This allows for investments in small scales with manageable risk within a micro licence coverage.
B. Public Private Partnership Opportunities – Given the opportunity for states to establish mini-grids ˣˣˣ
C. Incentives for Investment in Renewal Energy – Opportunities in solar, wind, hydroelectric, and biomass projects with incentives like feed-in tariffs and tax benefits. ˣˣˣᶦ The Act provides that the incentives shall be in accordance with the provisions the Industrial Development (Income Tax Relief) Act or such other fiscal policy frameworks that incentivize the implementation of renewable energy projects in Nigeria.
D. Private Licence Participation in Power Generation – The Act opened up this sector of the Industry for private participation.
E. Trading License – The Act further improves speedy electricity distribution by empowering individuals to contract with DISCOs to facilitate power wheeling to their residences or business locations through the DISCOs facilities.ˣˣˣᶦᶦ
F. Liberty to construct, own, or operate an undertaking for generating electricity not exceeding one megawatt in aggregate at a site, or an undertaking for distribution of electricity with a capacity not exceeding 100 kilowatts in aggregate at a site, or such other capacity as the Commission may determine from time to time, without a licence, for private and limited commercial consumption.


In conclusion, the reforms introduced by the Act are welcome development. It would aid in the promotion of private participation in addressing the issues hampering the desired policy objectives of government for sufficiency in the supply of electricity. The private investors would in turn import the needed capital to grow the sector.


i CSEA Africa: Challenges and Interventions Needs in the Nigerian Electricity Supply Industry (NESI) accessed on the 1/01/2023.
ii Municipal Authorities includes State and Local government. See section 2(2) of the Electricity Act, 2023.
iii Section 1 of the Electricity Act, 2023.
iv Act No. 30 of the 5th Alteration of the 1999 Constitution of the Federal Republic of Nigeria as Amended.
v Section 230(2) of the Electricity Act, 2023.
vi Dayo Adu and Samuel Olawepo : Unveiling The Electricity Act, 2023: Changes In The Power Sector, Opportunities And The Next Steps.
changes-in-the-power-sector-opportunities-and-the-next-steps accessed on the 6/7/23
vii Section 230(3) of the Act.
viii The National Integrated Electricity Policy and Strategic Implementation Plan provided for in Section 3 of the Act.
ix Section 3 of the Electricity Act, 2023.
x Section 33 & 34 of the Act, 2023.
xi Section 34(1) of the Act, 2023.
xii Section 34(2) of the Act, 2023.
xiii Section 127(1) of the Act, 2023.
xiv Section 127(2) of the Act, 2023.
xv Section 172 of the Act.
xvi Section 174 of the Act.
xvii Section 185 of the Act.
xviii Section 186 of the Act.
xix Section 3(1) of the Act.
xx KPMG: Commentaries on the Electricity Act, 2023–2023.html
xxi Section 80 of the Act
xxii Section 80 of the Act, applies also Independent system operators to transmit power from renewable energy sources.
xxiii Section 67 of the Electricity Act.
xxiv Section 15: Sections 16, 17, 18 & 19 of the Act, provides for the structure, powers and function of this IOS
xxv Section 113 and 114 of the Act
xxvi Section 68(1) of the Electricity Act.
xxvii Section 69 to 72 of the Act.
xxviii Part XX: Section 208, 209 to 217 of the Act.
xxix KPMG: Commentaries on the Electricity Act, 2023–2023.html accessed on the 4/7/23.
xxx Section 63 of the Act.
xxxi Nigeria: Powering Nigeria’s Future: Introducing The Electricity Act 2023


DISCLAIMER; This article is for information purposes, it may, or may not reflect the current position of the law and is therefore not intended to provide legal advice or guidance on litigation or provide commentary on any pending case or legislation.