By Abdulwasiu Hassan
Nigeria has passed a new law that makes it possible for sub-national governments and individuals to generate, transmit and distribute electricity.
The bill, signed into law by the country's new President, Bola Ahmed Tinubu on June 9, comes to the forefront with its significance at a time the majority of the 200 million-odd Nigerians have suffered from unreliable electricity supply for years.
"That's devolution of power," said President Tinubu of the new law. "It's our contribution to the developmental projects you are looking for, and we will continue in ways that will help our people."
Dr Ibrahim Danbatta, an energy expert in Nigeria, sees the law as a game changer. "This act will open up the electricity sector,” he told TRT Afrika.
Until the act was signed into law, the Transmission Company of Nigeria (TCN) was owned completely by the federal government of Nigeria.
History of reforms
The new law is the culmination of phased legal reforms in the power sector of the largest economy in Africa. Until the change came about, electricity generation, transmission and distribution used to rest solely in the hands of the defunct National Electrical Power Authority (NEPA).
NEPA was unbundled into several companies under the Power Holding Company of Nigeria when the 2005 Electric Power Sector Reform Act came into effect under the government of then President Olusegun Obasanjo.
These companies comprise six generating entities called “gencos”, 11 distribution companies called “discos” and one transmission company called Transmission Company of Nigeria.
Through the power sector reform under President Goodluck Jonathan, the Nigerian government divested six generating companies and sold up to 60% of its ownership in the 11 distribution companies. At the end of the reform cycle, power distribution was still about 4,000 megawatts.
Around 2021, the Nigerian government under President Muhammadu Buhari signed a six-year agreement with Siemens AG to raise the country’s power distribution to 11,000 megawatts by 2023. But peak power generation in Nigeria remains just around 4000 megawatts.
Law provisions
The 2023 electricity law will make it possible for Nigeria’s 36 states to give private companies or individuals licenses to generate, transmit and distribute electricity.
They will have to abide by the Nigerian Electricity Regulatory Commission (NERC)’s regulation regarding their obligation on the proportion of renewable energy they need to have.
Individuals can also generate up to 1 megawatt of electricity without a licence from either the NERC or the state government.
The idea is that electricity transmission, which used to be the sole responsibility of the Transmission Company of Nigeria, will no longer be a monopoly.
The law doesn’t, however, give room for inter-state transmission of electricity either by the states or individuals.
Until a state has made its electricity law, the NERC will continue to oversee the electricity sector of that region.
Implications
Beyond just how things work, the new law, if implemented properly, is going to have a profound impact on the socio-economic development of the largest economy in Africa, according to experts.
One of the effects experts believe will come with the new law is the efficiency associated with free market economy.
“It is going to bring in more key players who will invest more in terms of our distribution network, and this will enhance the quality and also the supply of electricity within Nigeria,” Ibrahim tells TRT Afrika.
“In terms of pricing, it will be competitive. Tariffs will be cheaper, thanks to multiple sources of generation and supply.”
In addition to systemic efficiency, the new law is expected to bring about employment opportunities for more Nigerians.
“If you look at it in terms of job creation, by the time you have more electricity, it’s going to open up more industries. People will get more jobs. It will bring in new key players in production,” says Ibrahim.
He also points out that the new law is an opportunity for those manufacturing, selling, buying and using electric vehicles, tricycles, motorcycles and even bicycles to cash in on the opportunity provided by the rise in fuel prices as a result of removal of subsidy.
“My call is for the immediate implementation of this legislation for Nigerians to start benefiting from it. The President has already done his part. The onus is now on the key players and other stakeholders to ensure that the law is implemented as soon as possible,” says Ibrahim.
Beyond the optimism, it remains to be seen what kind of effect the new law is going to have on Nigeria’s quest for reliable power supply.
