Economics, Featured, News

New Milestones in The Nigerian Energy Sector

Nmesoma Okwudili


April 1, 2023

The presidential media spokesperson, Tolu Ogunlesi brought a communiqué to public knowledge in his tweet, “President #MBuhari has signed 16 laws amending the constitution into law.”

“Another historical change: Due to the presidential assent, Nigerian states are now permitted to produce, transmit, and distribute power in national grid-served areas. This was prohibited before the modification. Through the constitution, this reform is real and sincere”.

President Major General Muhammadu Buhari successfully passed his 16th constitutional amendment bill into law, granting individual states the authority to license, produce, transmit, and disperse electricity within the state. 

This is seen as one of the 19 bills the president acceded to yesterday. Sixteen of which transmuted a few provisions of the 1999 constitution –fifth alteration bills 2023.  

The senior special advisor to the president on national assembly matters, Senator Babajide, expressed that, as a result of the amendment bill, financial independence has been guaranteed by the constitution to the state legislatures and judicial systems, and railroads transposed from the exclusive legislative list to the concurrent list.

What Are The Implications?

For the nation’s energy industry, the president of Nigeria signed a constitutional change allowing states to license power generation, transmission, and distribution. This move is expected to significantly improve the country’s power sector, which challenges have plagued for decades.

The amendment implies that the Nigerian states can now compete in the energy delivery market, which was previously solely the province of the Federal Government as run by the state regulator NERC.

Before this amendment, the federal government had absolute control over the power sector. However, this new law grants states the right to electricity distribution and transmission systems. This will engender a more decentralised power system in the country and effectuate a substantial change in the electricity system and less corruption.

As states now have more authority to create, distribute, and control power inside their borders, this policy move could improve the country’s availability and reliability of electrical supply. It encourages a cascading effect which may potentially lead to:

  • Enhancing operational effectiveness as a top priority
  • Increased employment of skilled and unskilled labour within states
  • Room to attract foreign investors.
  • Ability to correctly forecast load demands and prepare.
  • Self-sustaining revenue generation

This bill is aimed at decentralising power and giving states more control over electricity distribution, which is expected to improve the country’s power supply and encourage investment in the sector.

One key advantage is its upswing of the country’s power supply and encouragement of investment in the sector. Allowing states to license, generate, transmit, and distribute electricity creates a more diversified and competitive electricity market, which could lead to better service delivery, increased efficiency, and low costs for consumers. 

Additionally, decentralisation addresses the challenges of managing billions of new energy devices that generate energy from variable resources, such as solar and wind power. It also gives local communities and entrepreneurs opportunities to participate in the energy sector, creating jobs and driving economic growth. Overall, decentralising power and giving states umpteen control over electricity distribution could successfully tackle Nigeria’s power supply challenges and promote economic development.

To emphasise the magnitude of this new constitutional amendment, a report in 2020 says that, according to research, only nine of the 26 power plants connected to the national grid are responsible for up to 71% of the nation’s electricity production.

The plants, with a minimum contribution of 5.76 per cent each, are Egbin, Kainji, Azura-Edo IPP, Jebba, Delta, Shiroro, Odukpani, Afam VI, and Geregu.

Owing to its size and accessibility, the Egbin power plant contributed the most energy, 13.44% of the total output, followed by the Kainji hydroelectric project with an 8.31% share. Together with Delta, Azura Edo, Jebba, Shiroro, and Shiroro were among the top six contributors to output in 2020. The smallest output share during that period came from the Gbarain power plant, which contributed 0.24 per cent.

In view of the fact that they accounted for 67.26 per cent of total generation in 2019, the reliance on the aforementioned nine power plants increased by 4.54 percentage points. This new law will not only serve to curb the energy deficit already prevalent in the country but will also reduce the load demands on already established generation plants creating self-sufficient states capable of combating its ever-increasing load demands.

States like Lagos are growing at an average rate of around 2.5% to 3% per year.

This growth rate is driven by a combination of factors, including natural population increase, rural-urban migration, and international migration. The city’s population grew from about 1.4 million in 1970 to over 21 million in 2021, making it one of Africa’s most prominent and fastest-growing cities. With the growing population, states like Lagos state have been granted the license to cater to their inhabitants as against the power-sharing scheme many Nigerians have learned.

Another significant advantage of this new law is that it fosters the country’s development of renewable energy sources. Nigeria has enormous potential for renewable energy generation, but fossil fuels have long dominated its power sector. With more control given to the states, more investments in renewable energy projects are expected. This, in turn, will help to reduce the country’s carbon footprint and mitigate the effects of climate change.

Moreover, this move will create more competition in the power sector. As states take more control over their electricity systems, private companies will have the opportunity to compete in the market. This will lead to increased innovation and efficiency, which will, in turn, benefit the end consumers.

The new law also allows the federal government to focus on policy formulation and regulation while the states take charge of power generation and distribution. This erects a more efficient and effective power sector in the country.

It is worth noting that challenges come with decentralising the power sector. For instance, it may lead to unequal distribution of resources among the states. Therefore, the federal government must ensure that all states have equal access to resources and investments in the power sector. Additionally, there is a need to collaborate effectively among the states to avoid fragmentation and ensure a smooth transition.

The signing of the constitutional amendment by President Muhammadu Buhari is a significant milestone in Nigeria’s power sector. With the right policies and regulations, Nigerians can expect a more reliable, efficient, and sustainable power sector in Nigeria.


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