Impacts of the New Amendment on the NESI.

In 2023, achieving stable electricity still seems farfetched for Nigeria. According to the World Bank, Nigeria has the world’s most significant energy access deficit. In a bid to improve energy access in the country, the power sector has seen many frameworks, policies, investments, an influx of projects and recently, a new amendment. This article will explore the recent amendment and its impact on the Nigerian Electricity Supply Industry (NESI).

On the 17^th of March 2023, President Muhammadu Buhari, GCFR, signed a new bill into law that allows “A House of Assembly may make laws for the State with respect to the generation, transmission and distribution of electricity to areas covered by a national grid system within that State.” This new law empowers states to make laws and create frameworks specific to their capabilities and needs in relation to served and underserved areas, unlike in the past, when they were restricted to off-grid or unserved areas. Given the restriction of the state governments in this regard, this amendment is a step in the right direction.

One of the significant impacts of this amendment on the NESI is the uprising of state-sponsored financing structures. States can now form their state electricity markets, including laws, policies, and financing mechanisms, which opens up an opportunity for the private sector to get involved and contribute their investments. This development can enhance energy access and increase competition in the industry, resulting in job creation opportunities as states begin to source experienced and capable individuals to manage state power investments.

Decentralizing electricity markets allows for much-needed accountability, and this amendment can bring about improved efficiency and transparency. Also, state governments can now be held responsible for supply lapses, which could engender much-needed improvements in the NESI.

Another potential impact of this amendment is a tariff hike. States can now effectively engender market-driven tariffs, which permit periodic reviews that sufficiently accommodate and adjust for inflation and exchange rate fluctuation. This development is necessary to address the bane of businesses in Nigeria.

Furthermore, this amendment could decrease pressure on the national grid, as states can enact laws on generating, transmitting, and distributing electricity within their territory. Authorization to establish regional or isolated grids that run through their states is imminent, which would reduce pressure and overreliance on the national grid, resulting in a decline in system collapse. This development promotes grid flexibility and a reduction in grid expansion costs.

Despite this amendment’s opportunities, there is a risk of overregulation, intrusive compliance requirements, and increased costs due to numerous toll points within the sector. To hedge against these risks, stakeholders like the Nigeria Electricity Regulatory Commission (NERC), National Assembly, Federal Ministry of Power, and all states must chart a path as to how both the state and federal electricity markets will co-exist.

Some states have taken the lead in implementing this amendment, with Lagos State and Akwa Ibom State at the forefront. Lagos State had earlier enacted the Lagos State Electric Power Sector Reform Law 2018 and issued the Lagos State Electricity Policy 2021, recording some successes.

Considering the array of positive impacts this amendment will have on the NESI, it is evident that this is a much-needed leap and has what it takes to move the electricity market in Nigeria forward. However, critical actors in the power sector must create clear-cut frameworks and networks to facilitate this process and improve energy access. The NESI must take advantage of this amendment and work towards providing reliable and affordable energy to Nigerians.