Examining the Potential Opportunities and Challenges

CONTRIBUTED BY IFEDIORA obiora.c

INTRODUCTION

Nigeria’s electric power policy involves efforts to address challenges in the power sector, focusing on the generation, transmission, and distribution of electricity. The vital aspects may include promoting renewable energy, improving infrastructure, privatization of certain segments, and enhancing regulatory frameworks to attract investment and ensure efficiency.

The importance of electricity in Nigeria cannot be overemphasized. It is one of the most vital basic amenities which a government is expected to provide for its citizenry. It is relevant in the general activities of individuals; the agricultural sector, industry, environment, and socio-economic sphere in Nigeria, inter alia. It plays an important role in all aspects of development in the country. Pointedly, regular and adequate power supply is a hallmark of a developed country. There is no gainsaying that there is every need for a constant power supply in a country, as most activities are dependent on the availability of power supply.

This work is relevant as it digs into the potential opportunities relating to Nigeria’s electric power policy such as investment in renewable energy, infrastructure developments, privatization initiatives, to mention but a few. In furtherance, the challenges facing the power sector such as infrastructure deficiencies and funding constraints would be looked into.

KEY LEGAL FRAMEWORKS FOR THE NIGERIA ELECTRIC POWER SECTOR

THE CONSTITUTION OF THE FEDERAL REPUBLIC OF NIGERIA (CFRN) 1999 (AS AMENDED)

The fact is ubiquitous that the constitution is the grundnorm of the land. This is evidenced by its provision that the Constitution is supreme and its provision shall have binding force on all authorities.^[1] It gives validity to all other laws in the country and every other law which is inconsistent with its provision shall be null and void, to the extent of its inconsistency.^[2] It makes provision for the powers of the government to make laws regarding electricity in Nigeria. The CFRN lists electricity as one of the matters in the concurrent legislative list. This is seen in items 13 and 14 of Part II, Second Schedule of the CFRN 1999.

Initially, the National Assembly was empowered to make laws for the federation regarding electricity,^[3] and the House of Assembly may make laws for the State with respect to electricity in areas not covered by the national grid. The Second Schedule to the CFRN creates a legal dilemma wherein the state’s power to generate, transmit and distribute is limited to areas not covered by the national grid. This limitation is of such a fundamental nature wherein states effectively cannot take action to provide remedies to the inadequacies of power generation within the control of the federal government.^[4] However, there has been an amendment of the above provision by deleting the wording in this section that restricts State Assemblies from making laws on the generation, transmission and distribution of electricity in areas not covered by a national grid system within their State. By so doing, it expands their legislative powers to make laws on the generation, transmission and distribution of electricity to include areas within their State “covered” by the national grid. This recent development of the law is laudable as it will go a long way in de-monopolizing the system and improving the power sector.

It is worthy of note that the power of the Federal Government to enact laws on electricity remains and each state in Nigeria would have to make or amend their laws to reflect the alteration of the constitution.

THE ELECTRICITY ACT 2023

The Electricity Act 2023 came into force and repealed the Electric Power Sector Reform Act of 2005 and provides a guide for the post-privatisation phase of Nigeria’s electricity industry. It assures the de-centralisation and de-monopolisation of Nigeria’s electricity generation, transmission, and distribution at the National level and authorizes states, companies, and individuals to generate, transmit and distribute electricity.^[5]

It charges the Ministry of Power in consultation with relevant government authorities and stakeholders to develop an Integrated Electricity Policy and Strategic Implementation Plan.^[6] In furtherance, it recognizes the power of the state government in making laws for the generation, transmission and distribution of electricity. States are empowered to issue licenses to private persons who would be permitted to use mini-grids and power plants within the state.^[7]

The Act plays a vital role in the power sector as it is targeted at transforming Nigeria’s electricity sector into an efficient and competitive industry by attracting significant private sector investments, promoting the deployment of renewable energy, creating more access to electricity, and fostering fair and transparent regulations that protect the interests of consumers.

THE NIGERIA ELECTRIC POWER POLICY (NEPP)

The Policy is the end product of a survey carried out by the Nigerian government. The purpose of the survey was to find out the key challenges in the power sector and provide guidelines to transform the sector. It made provision for the basis for the reform plan and signified the birth of Nigeria’s modern power sector. In 2005, the reform was given great impetus by the Electric Power Sector Reform Act (EPSRA), introduced to provide legal support for the reform and implement the strategy.^[8] The Policy underlined restructuring and privatization of the sector, with a view to opening up the sector to other industry players for wider participation.^[9]

The policy provided for the need for reform and remarked that the power sector is very capital-intensive. It pointed out that the government, being overburdened with responsibilities in the other sectors, found it difficult to fund the development of the power sector, thus, the need to reform the sector so as to attract and encourage private sector participation, attract capital to fund the sector and ensure a level playing ground for all investors.^[10]

Flowing from the above, it entails that the NEPP created an environment that is conducive to private sector participation in the power sector. The NEPP called for the privatization of the state-owned NEPA and the creation of a competitive market for electricity generation, transmission, and distribution. The aim of this reform was to encourage investment and innovation in the power sector and to improve the efficiency and reliability of electricity services. Secondly, the NEPP identified a lack of investment capital as a key challenge in the Nigerian power sector, and it included provisions to attract capital for investment in the sector, finally, the NEPP aimed to create a level playing field for all investors by establishing clear and transparent rules for the power sector.

The policy’s general objective is to ensure that Nigeria has an Electricity Supply Industry (ESI) that can meet the needs of its citizens in the 21st century. It pointed out that a technically and commercially efficient ESI is critical for achieving Nigeria’s growth and development goals. The ESI is designed to meet all current and prospective economically justifiable demands for electricity throughout Nigeria; modernize and expand its coverage; and support national economic and social development, including relations with neighboring countries.^[11]

It is noteworthy that the Policy made provision for regulatory frameworks which include the Federal Government, Federal Ministry of Power and Steel, State Government and the Nigeria Electricity Regulatory Commission (NERC)

The policy did not fail to give responsibilities to the institutions it created. For example, it prescribes that the Federal Government will provide overall direction for the development of the electricity industry in Nigeria, ensure the general consistency of electric power policy with all other national policies and enact necessary laws required to support the Federal Policy on Electricity.^[12] Provisions were also made for the responsibilities, of the Federal Ministry of Power and Steel,^[13] the State Government,^[14] and the NERC.^[15]

POTENTIALS AND CHALLENGES OF THE NATIONAL ELECTRIC POWER POLICY

KEY POTENTIALS AND OPPORTUNITIES

The recent extant laws and policies enacted by the Nigerian legislature have shown to have the objective of providing a comprehensive and institutional framework to govern the operation of a privatized, contract and rule-based competitive electricity market in Nigeria and to attract private sector investments in the entire power value chain of the Nigerian Electricity Supply Industry (NESI). Thus, it is pertinent to examine the potential and challenges of Nigeria’s electric power laws and policies. They are succinctly explained below:

1. Investment in Renewable Energy: It presents opportunities for investors in solar, wind, and hydroelectric projects as the extant laws aim at diversifying its energy mix and increasing the share of renewable sources.
2. Infrastructure Development: While the Nigerian government makes efforts to upgrade and expand its electricity grid, companies involved in the construction and maintenance of power infrastructure, such as transmission lines and substations, can find opportunities to render these services.
3. Privatization Initiatives: The privatization of some power generation and distribution assets creates opportunities for private sector involvement, offering potential for increased efficiency and innovation.
4. The establishment of mini-grids and off-grid solutions to remote areas which are unserved and underserved can attract opportunities for investment in the manufacturing and supply of electrical equipment, thereby promoting local content and economic development.^[16]
5. The Act creates a transmission and distribution network by making available opportunities for investments in transmission lines, substations, distribution networks, and smart systems.

NOTABLE CHALLENGES AFFECTING THE ELECTRICITY SECTOR

1. Infrastructure Deficiency: Inadequate power infrastructure, including transmission and distribution networks, poses a significant challenge to reliable electricity supply.
2. Political Issues: There can be progress if there is a level playing ground for stakeholders and investors in the power sector reform. Where the country is politically unstable, investors will be reluctant to invest in such a country. For example, the hostile nature of the Niger Delta region scares investors away due to the excessive cut in gas supply to the power plants. This poses a challenge to the development of the Nigerian electric power sector.
3. Issues of Environment: The creation of new generation capacity may require the expansion of an existing one. The construction of a new power plant may depend on the nature of the environment. Thus, where power plants are built in the same area where there are certain industries, it can lead to an increase in the emission of dangerous chemicals.
4. Corruption: This is a major problem in Nigeria and it equally permeates the Nigeria’s electric power sector. The sector is heavily underfunded and limited financial resources hinder the implementation of large-scale projects and infrastructure upgrades needed to meet growing energy demand. At times, funds are not utilized adequately in carrying out power projects. This inhibits the growth of the sector in Nigeria.

CONCLUSION AND RECOMMENDATIONS

The importance of electricity cannot be overemphasized. It was noted earlier that electricity is the hallmark of a developed country and it is relevant in all spheres of development in a country. The power sector in Nigeria has undergone a series of reforms to ensure that the needs and demands of consumers are met. The power sector was formerly a major responsibility of the Federal Government, to a large extent. However, as a result of the reforms to improve the power sector, the heavy burden on the Federal government was lessened. The recent alteration of the CFRN allowed the state government to make laws on electricity to also include areas covered by the national grid. The Electricity Act 2023, also recognized the power of state government to license private persons to control electricity to the extent of their license.

Despite these developments and improvements, the power sector is still met with challenges which restrain the required rapid development expected of it. To lessen these challenges, it is recommended that there should be collaboration between the public and private sectors to ensure the successful implementation of the Act and in turn, realise its vision for a more efficient, reliable, and sustainable power sector in order to provide electricity to Nigeria.

1. CFRN 1999 (as amended), s 1(1) ↑
2. Ibid, s 1(3) ↑
3. CFRN 1999 (as amended), item 13, Part II of Second Schedule ↑
4. Olugbemi, AO, ‘Distributed Energy Resources in Nigeria: Analyzing the Amendment to the Constitution of the Federal Republic of Nigeria (Fifth Alteration) Bill, No. 33, 2022’, https://www.ajol.info/index.php/epr/article/view/252730/238790 accessed 23rd January, 2024. ↑
5. Electricity Act, s 1. ↑
6. Ibid, s 3(1). ↑
7. Ibid, s 63. ↑
8. Babatunde, O et al, ‘Electricity Sector Assessment in Nigeria: The Post-Liberation Era’, (2023) (10 (1) Cogent Engineering. ↑
9. Edet, EB., ‘The Nigeria Electricity Sector: The Journey Thus Far and the Future’, (2020) (4) (1) UNILAG Law Review, 228. ↑
10. National Electric Power Policy, para 1.4 ↑
11. Ibid, para 2.0 ↑
12. Ibid, para 3.1.1 ↑
13. Ibid, para 3.1.2 ↑
14. Ibid, para 3.1.3 ↑
15. Ibid, para 3.1.4 ↑
16. Onojason, G, et al, ‘The Electricity Act 2023 and the Constitutional Amendment Act 2023: Implications for the Power Sector’ <https://www.mondaq.com/nigeria/renewables/1363558/the-electricity-act-2023-and-the-constitutional-amendment-act-2023-implications-for-the-power-sector>, accessed 23rd January, 2024. ↑