June 25, 2025/CSL Research
According to a Punch news report, Nigeria’s power sector is undergoing a historic transformation following the enactment of the Electricity Act 2023, which decentralises electricity regulation and empowers states to control generation, transmission, and distribution within their territories. Already, seven states—including Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—have assumed full regulatory authority, with others such as Lagos, Ogun, and Anambra set to follow.
While this marks a significant shift from the formerly centralised model overseen solely by the Nigerian Electricity Regulatory Commission (NERC), the move has sparked both optimism and concern. Industry experts view it as a step towards greater energy independence and market competitiveness, but questions remain about regulatory capacity, coordination with federal authorities, and the future role of NERC in a fragmented regulatory landscape.
Under the pre-2023 structure, NERC functioned as the centralised, all-encompassing regulator of Nigeria’s electricity sector. It had complete control over regulation, pricing, licensing, market development, and consumer protection, with no formal regulatory role for state governments. The Electricity Act 2023 radically changed this by allowing states to establish their own regulatory frameworks—marking a major shift from federal centralisation to shared regulatory responsibility. NERC was responsible for issuing all licences across the country. States had no formal role in licensing or regulating electricity activities, even within their territories. NERC also had exclusive control over approving electricity tariffs (Multi-Year Tariff Order – MYTO), ensuring tariffs reflected cost recovery while protecting consumers and managing subsidy regimes and balancing affordability with investment viability.
One of the key benefits of devolving electricity regulation to state governments is the ability to respond more efficiently to local power challenges. Unlike the previous centralised system, which often resulted in bureaucratic delays and one-size-fits-all policies, states can now design and implement solutions that are better aligned with their specific geographical, economic, and demographic contexts. The shift to a decentralised model creates a more attractive environment for private investment. Independent Power Producers (IPPs), renewable energy developers, and local utility companies may now find it easier to engage with state governments rather than navigating the often complex and slow-moving national regulatory framework. With states competing to offer better energy services to residents and businesses, decentralisation may foster a more dynamic and competitive electricity market.
Consumers could benefit from improved service reliability, better customer care, and possibly lower prices, depending on how states structure their tariffs and regulations. The decentralised model encourages states to build and maintain their own generation and distribution infrastructure. This could alleviate pressure on the overstretched national grid, which is currently plagued by inefficiencies, ageing infrastructure, and frequent breakdowns.
That said, a significant concern with decentralisation is whether states are adequately prepared to manage the complex technical, legal, and administrative responsibilities that come with regulating electricity. Key challenges include ensuring regulatory clarity, effectively managing subsidies, and avoiding potential conflicts between state authorities and federal oversight.
Click here to download full report: CSL Nigeria Daily – 25 June 2025 – Power.pdf
