Electricity Consumers Worry as 16 States Falter on Decentralization
Electricity consumers across Nigeria are growing increasingly concerned as more than 16 states struggle to establish effective regulatory systems under the country's power decentralization efforts. This development, particularly in states such as Ogun, Imo, and Edo, is raising alarms within the power sector, with sources at the Nigerian Electricity Regulatory Commission (NERC) revealing that some subnational governments have yet to set up fully operational State Electricity Regulatory Commissions (SERCs). In some cases, licences are being issued outside the legal regulatory framework, exacerbating the challenges.
Structural Weaknesses and Litigation Emerge
At a recent workshop in Ibadan, which brought together regulators and state actors from Oyo, Ondo, Ekiti, Lagos, Imo, Niger, and Plateau states, NERC highlighted that while decentralization offers opportunities to bring regulation closer to consumers, it is exposing significant structural weaknesses in Nigeria's power governance framework. The transition is occurring amid fresh litigation and an ongoing review of the Electricity Act 2023 at the National Assembly, further complicating the situation.
Under the decentralized system introduced by the Electricity Act, state governments are empowered to establish regulatory authorities to oversee electricity markets within their territories. States involved include Bayelsa, Lagos, Gombe, Kogi, Imo, Ogun, Ondo, Ekiti, Enugu, Niger, Edo, Oyo, and Plateau. However, many of these states are faltering in implementation.
Examples of Progress and Problems
In Abia State, the Abia State Electricity Regulatory Authority (ASERA) has licensed three state-level subsidiary distribution companies (SubCos): Geometric Power Limited, Aba Power Limited, and New Era Electricity Distribution Company. Similarly, in Lagos, Governor Babajide Sanwo-Olu inaugurated a five-man Board of the Lagos State Electricity Regulatory Commission (LASERC), marking a milestone toward building a modern and independent electricity market. Two SubCos were granted three-year licenses to IE Electricity Limited, a subsidiary of Ikeja Electric, and Excel Electricity Distribution Limited, linked to Eko Electricity Distribution Plc.
Despite these steps, issues are arising related to asset segregation, liabilities, contractual obligations, and personnel, leading to litigations that the Nigerian judiciary has limited expertise to manage. Regulators are expected to be closer to users and respond quickly to complaints, but states that received regulatory transition approval months ago have not established fully operational frameworks.
Regulatory Vacuum and Jurisdictional Conflicts
In Ogun State, which formally took over electricity regulation from NERC in December 2024, there is currently no functional regulatory structure in place. Reports indicate that electricity permits are being issued by political appointees rather than a legally constituted regulator, with NERC noting a recent permit issued by a Special Assistant to the governor. This creates a vacuum for consumers, as NERC has shut its forum office following the transition.
Similar concerns are emerging in Imo State, where NERC says the state has yet to formally license the existing distribution operator, Enugu Electricity Distribution Company (EEDC). Yet, within weeks of its establishment, the same regulator reportedly issued a licence to Orashi Electricity Company for generation, transmission, and distribution without a clearly defined process, raising questions about market coordination and jurisdiction.
Regulators warn that such actions risk creating serious distortions in Nigeria's already financially fragile electricity market. An example cited during the workshop involved a newly licensed distributor connecting additional industrial customers to an existing power line without the knowledge of the original operator, leading to discrepancies between recorded supply and actual consumption.
Coordination and Long-Term Benefits
Under the Electricity Act, states regulate markets within their territories, but activities involving the national grid, such as through 132kV or 330kV transmission infrastructure, remain under federal oversight. Clearer coordination mechanisms are being developed through a proposed Forum of Regulators to define responsibilities between federal and state authorities.
Despite the challenges, stakeholders like power sector analyst Adetayo Adegbemle argue that decentralization remains the most realistic pathway for fixing Nigeria's electricity sector. He noted mixed feedback on implementation, with some states issuing permits illegally, threatening the sector's health. States are likely to develop at different speeds, with northern states like Kano, Katsina, and Jigawa exploring regional markets for cheaper electricity.
Emeka Onyegbule, pioneer chairman of ASERA, described licence issuance by state ministries as a serious anomaly that could destroy subnational markets. However, he emphasized decentralization's long-term benefits, such as improved consumer protection and community electrification, citing a case in Etche, Rivers State, where power was restored after 20 years through state initiative.
Investor Concerns and Legislative Review
Investors like Edu Okeke, Managing Director of Azura Power West Africa, warn that states may lack capacity to regulate the entire value chain, suggesting federal retention of authority over generation and transmission while states focus on distribution and tariffs. Chairman of the Senate Committee on Power, Enyinnaya Abaribe, confirmed that the National Assembly is reviewing the Electricity Act to address issues, including stronger penalties for vandalism, improved policy coordination, and clearer jurisdictional guidelines.
In Gombe, a source indicated the state is nearing regulatory requirements after setting up its SERC, acknowledging that challenges similar to NERC's early days are expected at the local level. As Nigeria navigates this transition, the success of decentralization hinges on effective implementation and coordination to ensure reliable electricity for all consumers.
