Regulatory chaos threatens power sector reforms over control 

.     Investors pull funds, demand policy clarity

.      Squabblings threaten efforts to save struggling industry – Expert 

By AYOOLA OLAOLUWA 

Nigeria’s already fragile electricity industry is facing fresh pressure as wary investors pull billions of naira from power sector projects over growing uncertainty surrounding regulatory control of the market, Business Hallmark can report. 

The new challenge comes from increasing assertion of authority by  states governments seeking to regulate independent electricity markets under the Electricity Act 2023.

President Bola Tinubu had on June 8, 2023, signed into law the Electricity Act Bill 2023, a landmark legislation aimed at fixing Nigeria’s power sector problems.

According to the framers of the legislation, the new Act will move Nigeria away from a centralized, federal-dominated electricity landscape to a more decentralized, multi-tiered electricity market led by the private-sector.

To further refine and reshape how electricity is governed across the country, the president signed into law the Electricity Act (Amendment) Bill 2025 on February 2, 2026. The amended legislation granted states electricity regulatory broader powers to regulate electricity generation, transmission, system operations, distribution, and retail supply within their borders.

Based on available data obtained by BH, at least 15 states of the federation, namely Enugu, Ekiti,  Ondo, Imo Oyo, Edo, Kogi, Lagos, Ogun, Niger, Plateau, Abia, Anambra, Nasarawa and Bayelsa have formally assumed control of electricity market regulation within their jurisdictions with the establishment of their own State Electricity Regulators (SERs).

Checks by our correspondent revealed that many of the state electricity boards have been licensing operators, setting tariffs, driving investments and ensuring consumer protection within their respective states.

Clash of Objectives

However, the initial embrace and applause for the bold initiative have given way to that of concerns with the breakout of jurisdictional rivalry and tensions between states and federal regulators.

In July 2025, the Enugu State Electricity Regulatory Commission (ESERC), issued a new tariff to MainPower Electricity Distribution Limited, the electricity company that succeeded Enugu Electricity Distribution Company (EEDC) in the state.

The order, with number EERC/2025/003 and tittled: “Tariff Order for MainPower Electricity Distribution Limited 2025, compelled MainPower to slash the electricity tariff in the coal city state.

Specifically, EERC reviewed downward electricity cost for Band A from N209/ kWh (per kiloWatt) to N160/kWh, with the new tariff taking effect from August 1, 2025.

Defending its action, EERC said it acted in compliance with the Enugu State Electricity Law 2023, which empowers it to regulate the activities of electricity companies in the state

Other state governments quickly threw their weight behind EERC, describing the tariff review a well intentioned one. They also announced the intention to adopt Enugu’s example.

Speaking on behalf of the 36 states commissioners for Energy under the aegis of the Forum of Commissioners of Power and Energy in Nigeria (FOCPEN), the forum said it’s in total support of EERC’s decision.

“It is crucial to understand that Enugu State’s actions are fully aligned with the provisions of the Constitution of the Federal Republic of Nigeria, the Electricity Act 2023, and Enugu State electricity laws and regulations.

“These legal frameworks empower states to regulate their intra-state electricity markets, including determining and implementing electricity tariffs within their jurisdiction, which are fair to electricity consumers and sufficient to allow licensees to recover their operating expenses and investments.

“FOCPEN wishes to also clarify that the EERC’s tariff order followed a comprehensive and meticulous review process that involved a thorough examination of the capital expenditure (Capex) and operational expenditure (OpEx) assumptions of MainPower Electricity Distribution Company, the state electricity distribution company.

“This rigorous assessment was conducted using data and information provided by the distribution company itself. EERC also carried out a rigorous assessment of MainPower’s existing customer tariff classification and regulatory asset base”, the forum noted.

Spanner in the Works

However, the Federal Government, through the Nigerian Electricity Regulatory Commission (NERC), kicked against states’ move to effect separate tariff orders different from the one it put in place, calling it ill-advised. It maintained that the move will bring the sector to its knees if states refused to call it off.

In the same vein, electricity distribution companies (discos) under their umbrella body, Association of Nigerian Electricity Distributors (ANED), lamented that Enugu’s action had affected other discos outside the state battling mounting pressure to reduce tariffs.

ANED’s Chief Executive Officer, Sunday Oduntan, lamented that electricity consumers are already threatening to stop paying bills.

He also said that discos operating in other parts of the country are under intense pressure to follow suit since the EERC’s tariff order was issued.

He added that the EERC unilaterally made the decision to slash tariff without adequate coordination with NERC and other key market players.

“We duly recognise changes in law and regulation that now permits states to set up their electricity markets.

“However, any state-level policy action, such as uncoordinated tariff reductions that does not align with market-wide cost-recovery mechanisms will inevitably result in shortfalls in discos remittances to the market below their current Distribution Remittance Obligations (DROs), thereby putting GenCos and other upstream service providers at further financial risks”.

The ANED boss maintained that  the tariff reduction by EERC raises significant concerns for the stability and liquidity of the Nigerian Electricity Supply Industry (NESI).

“It is not our intention to make life difficult for our loyal customers, and we have been aligning with the federal government to ensure provision of stable power supply.

Also, electricity generation companies operating in the country kicked against states move to review the existing energy tariff order.

More Opposition

The Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, warned that the tariff revision by Enugu sets a precedent for all other states and fails to reflect the true cost of electricity generation.

In the same vein, the industry’s national regulator, NERC, maintained that state governments lack jurisdiction over national grid and electric power stations established under federal laws or operating under licences it issued.

The commission warned state governments to reflect the wholesale costs in tariffs or be ready to pay subsidies for any tariff shortfall.

“As states do not have jurisdiction over the national grid and over electric power stations established under federal laws/operating under licences issued by the commission; they must holistically incorporate the wholesale costs of grid supply to their states without any qualification or deviation in their design of tariffs for end-use customers in order not to distort the dynamics of the market or be prepared to make a policy intervention by way a subsidy for any deviation in the tariff structure that distorts the wholesale generation, transmission and legacy financing costs in the Nigeria Electricity Supply Industry”.

NERC warned that it would not allow institutions to take decisions that expose the national grid and wholesale electricity market to a financial crisis in contravention of express powers granted to them by the constitution.

States’ Assert Authority

However, states and their new constituted electricity boards are refusing to back down. Under the current arrangement, only the Federal Government through NERC can fix electricity tariffs.

But the Lagos State government has informed electricity consumers in the state to brace themselves for a hike in tariffs, saying there will be no subsidy in Lagos.

The state’s Commissioner for Energy and Mineral Resources, Biodun Ogunleye, who made the revelation at the maiden stakeholders forum organised by the Lagos State Electricity Regulatory Commission (LASERC) held last week in Ikeja, Lagos, said consumers in the state would pay the real cost of electricity as directed by Governor Babajide Sanwo-Olu.

According to Ogunleye, everybody in the Lagos electricity value chain must pay as there is no power subsidy in state.

In the same vein, many states of the federation have signified their intention to exercise shareholder rights in power assets located within their domains.

Some of the state governments asking for equity in power assets operating in their backyards are Ekiti, Delta, Ondo and Edo.

The states, BH learnt, had informed NERC of their intention to exercise shareholder rights in the Benin Electricity Distribution Company (BEDC).

According to the states in a letter titled ‘Notification of intent to exercise shareholder rights in the Benin Electricity Distribution Company (BEDC)’ addressed to the immediate past Minister of Power, Adebayo Adelabu; Chairman, Ministry of Finance Incorporated (MOFI); Director General, Nigeria Governors Forum (NGF); Chairman, Senate Committee on Power and Chairman, House of Representatives Committee on Power, the decision is to correct a historical lapse.

“We write to formally inform the NERC (the “Commission”) of the intent of the governments of Delta State, Edo State, Ekiti State and Ondo State (the “BEDC State Governments”) regarding our collective residual equity in the Benin Electricity Distribution Company (BEDC).

“After a thorough evaluation of the operational deficiencies and service delivery failures to our states, the BEDC state governments intend to exercise our shareholder rights in BEDC, to ensure the efficient provision of electricity services to our citizens.

Please note that our demand is not capricious and merely wishes to correct a historical lapse.

“We also urge the commission to immediately commence the process of unbundling BEDC into its operational areas along state boundaries”, the state governments noted.

Investors Flight

Meanwhile, state governments increasing assertion of authority in the electricity markets within their states, as well as power operators/industry regulators insistence that they lack the power to do so, have continued to cause confusion in the industry.

BH learnt that the feud is scaring away investors, who are scaling back funds already earmarked for capital projects.

According to industry stakeholders,  the deepening power struggle between federal agencies and state governments is eroding investor confidence at a time the sector desperately needs capital to improve generation, transmission and distribution infrastructure.

A source in a multinational power firm with huge presence in Nigeria informed our correspondent that  overlapping regulations, licensing disputes and unclear market boundaries is discouraging long-term investments in the power sector.

The reliable source, who did not want his identity revealed, informed BH that his company is holding back on funds in excess of $1billion until there’s a clear picture of the true state of affairs in the industry.

“The uncertainty is compounding existing challenges in Nigeria’s power industry, including liquidity shortages, weak infrastructure, mounting debts and poor electricity supply.

“Unless authorities provide clear regulatory direction and harmonise responsibilities between federal and state institutions, the sector may witness slower investment inflows, stalled projects and worsening power shortages across the country.

“We don’t want a situation that another regulator will void our  efforts after making huge commitments in a project. We’ll rather wait until we know who’s really in charge”, the source explained.

In his own reaction, a professor of Energy at the University of Lagos, Dayo Ayoade, cautioned against conflicts.

While urging the Federal Government and states to put mechanisms in place to foster the growth of the power sector during the transition, Ayoade advised state regulators to be investor-friendly instead of putting up regulations that could scare investors away.