Social Impact of Power Sector Reforms in Nigeria
In 1999, Nigeria established the Electric Power Sector Reform Implementation Committee and adopted the Nigerian Electric Power Policy in 2002. As of 2022, 60.5% of its population has access to electricity. This figure is already a milestone, given that in 1990, it was only 27.3%.
While Nigeria boasts robust clean energy potential and substantial gas reserves, it remains electricity-energy poor. However, since the ‘90s, the country’s power sector has undergone pivotal reforms to help combat its electrification woes.
Decades of Reforms
Nigeria’s power sector once functioned as a vertically integrated monopoly managed by a sole government-owned utility.
In 1999, Nigeria established the Electric Power Sector Reform Implementation Committee and adopted the Nigerian Electric Power Policy in 2002. In 2004, the National Integrated Power Project was conceived. This was followed by the enactment of the Electric Power Sector Reform Act and the establishment of the Nigerian Electricity Regulatory Commission (NERC). Early 2010s reforms included the Presidential Action Committee on Power, the Presidential Task Force on Power, the release of the Roadmap for Power Sector Reform, and the incorporation of the Nigerian Bulk Electricity Trader.
In 2013, the generation and distribution subsectors were privatised, while the transmission subsector remained under government control. By 2017 and 2018, the Eligible Customer Policy, Disco Franchising, and the Meter Asset Provider (MAP) scheme were launched. The Service-Based Tariff (SBT) regime and the National Mass Metering Programme (NMMP) began in 2020. In 2022, regulatory net-off was approved and implemented.
All these reforms have helped the country increase its electrification rate. As of 2022, 60.5% of its population has access to electricity. This figure is already a milestone, given that in 1990, it was only 27.3%.
The Electricity Act 2023 and Its Impact
The Electricity Act 2023, enacted in June 2023, is another giant step in modernising Nigeria’s power sector.
Poised to introduce more developments, the Act repeals the 2005 Electric Power Sector Reform Act and consolidates various laws related to the Nigerian electricity supply industry. One of its key highlights is establishing a framework for decentralisation and de-monopolisation, granting states, companies, and individuals the authority to generate, transmit, and distribute electricity. This move allows states to establish their electricity markets independently of the NERC.
Additionally, the Act mandates the Ministry of Power to publish an integrated national electricity policy and strategic implementation plan within a year, with reviews every five years. This policy will guide sector development, focusing on rural electrification, optimal resource utilisation (including coal, natural gas, and renewables), and various incentives such as waivers and subsidies.
NERC was also re-established as a corporate body with regulatory authority over the Nigerian Electricity Supply Industry (NESI). It is tasked with ensuring adequate supply, market pricing, and industry regulation. The Act also focuses on renewable energy, simplifying the licensing process and introducing incentives like tax breaks and feed-in tariffs to encourage investment in solar, wind, biomass, and small hydro projects.
The social impact of the Electricity Act 2023 is, simply put, transformative. It’s particularly beneficial for rural and underserved communities as it empowers localised control over electricity. Apart from fostering inclusivity, it also enhances various sectors, ranging from health to retail, and attracts investment.
“The Electricity Act 2023 has the potential to attract crucial investments in the power sector’s transformation… However, there is more to be done to enhance the legislation and make it more responsive to the yearnings of industry stakeholders,” said Pedro Omontuemhen, Partner - West Market Area, Energy, Utilities & Resources Leader at PwC, in a recent report.
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