December 4, 2023

NIGERIAN ELECTRICITY REFORMS: WHAT DOES THE FUTURE HOLD?

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Introduction

The Nigerian Electricity Supply Industry (“NESI”) has undergone a number of reforms over the past two decades. The modern history of the NESI can be traced to the National Electric Power Policy, 2001 and the Nigerian National Energy Policy, 2023 which brought about a number of policy formulation for the NESI.[1] The first legislative enactment under the Constitution of the Federal Republic of Nigeria 1999 (the “Constitution”) for the NESI was the Electric Power Sector Reform Act, 2005 (“EPSRA”).[2] The ESPRA governed the Nigerian electricity industry including electricity generation, transmission, distribution, trading, and supply.[3]

Under ESPRA, the Nigerian Electricity Regulatory Commission (“NERC” or “Commission”) was established as the regulatory body saddled with the responsibility of issuing policies, regulations, guidelines, and licenses with respect to power generation, transmission and distribution in the NESI.[4] Also, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises 18 successor companies (6 generation companies, 11 distribution companies and a transmission company) created from the National Electric Power Authority.[5]

Under the Constitution, matters relating to electricity can be found under Part II of the Second Schedule to the Constitution. Whilst Item 13 (b) of the schedule to the Constitution enables the National Assembly to make laws with respect to electricity generation and transmission, item 14(b) of the schedule to the Constitution restricts State Houses of Assembly law-making capacity with respect to electricity generation, transmission, and distribution, only to areas not covered by the national grid. The supposedly harmless inclusion of the word “not covered by the national grid” has hampered the ability of states of the federation to develop a robust electricity market within their respective states. Implicitly, states can only make electricity laws on areas within that state that are not covered by the national grid.

Notwithstanding the provision of the schedule to the Constitution, it has been argued in some quarters that the National Assembly does not have the powers to make laws on distribution, as same was not expressly mentioned in the Constitution, thus questioning the validity of ESPRA with respect to electricity distribution in the NESI.[6]

The above debate became academic when the former president of the Federal Republic of Nigeria, Muhammadu Buhari, on 17 March 2023, signed the Fifth Alteration Bill No. 33, Devolution of Powers (National Grid System) (“Constitutional Amendment”). The Constitutional Amendment effectively expunged the limiting phrase “areas not covered by national grid” that was in Item 14 (b) of the Constitution Schedule. Thus, this Constitutional Amendment heralded a new outlook in the NESI as willing states could now make laws with respect to electricity generation, transmission and distribution even in areas covered by the national grid.

[1] https://www.linkedin.com/posts/dr-ayodele-oni-97a3b3b_s45-of-the-constitution-state-powers-activity-7059097646212202497-CxqY?utm_source=share&utm_medium=member_android

[2] https://nairametrics.com/2022/09/11/a-look-at-laws-governing-the-power-sector-in-nigeria/

[3] https://nairametrics.com/2022/09/11/a-look-at-laws-governing-the-power-sector-in-nigeria/

[4] https://nerc.gov.ng/index.php/home/nesi/401-history

[5] Section 32 of the Electric Power Sector Reform Act, 2005

[6] https://www.linkedin.com/posts/dr-ayodele-oni-97a3b3b_s45-of-the-constitution-state-powers-activity-7059097646212202497-CxqY?utm_source=share&utm_medium=member_android

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