The Electricity Act of 2023 in Nigeria has been approved by President Bola Ahmed Tinubu, signalling his support for the privatization and de-monopolization of the electricity sector early in his tenure. This Act replaces the Electricity and Power Sector Reform Act of 2005 and provides a framework for the Nigerian Electricity Supply Industry (NESI) during the post-privatization phase, encouraging private sector investment in the industry.
The Act introduces national de-monopolization of electricity generation, transmission, and distribution in Nigeria, granting states, businesses, and private citizens more freedom to engage in these activities. Private investors can obtain licenses from the government to operate power plants and mini-grids within their respective states. However, the Act prohibits the cross-border delivery of power, both at the state and international levels.
Under the Electricity Act of 2023, the Nigerian Electricity Regulatory Commission (NERC) is empowered to oversee the electricity market in Nigeria without impeding the states' legislative authority to establish and regulate electricity markets within their boundaries. The Act outlines how NERC can delegate its regulatory responsibilities to state regulators once they are established. Until a state enacts legislation governing its power market, NERC will continue to oversee all electricity-related transactions within that state.
Some states in Nigeria, including Lagos, Edo, and Kaduna, already have energy market regulations in place and can commence market regulation. However, NERC will govern states that lack such legislation. NERC will continue to oversee the generation and transmission of electricity across state borders.
The Act also stipulates that no license is required for individuals or entities to build, own, or operate electricity generation facilities with a total capacity not exceeding 1 megawatt (MW) at a single site or electricity distribution facilities with a total capacity not exceeding 100 kilowatts (KW) at a single site. The Act grants NERC the authority to determine other capacities that may be exempt from licensing requirements.
Electricity generation license holders must comply with renewable generating requirements established by NERC. They are obligated under the Act to produce power from renewable energy sources, purchase power generated from renewable sources, or acquire instruments representing the output of renewable energy.