Seven Nigerian States Take Over Power Regulation

Nigeria’s electricity sector is undergoing a historic shift as seven states—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—have assumed regulatory control of their electricity markets under the Electricity Act 2023, signed into law by President Bola Tinubu.

This decentralization allows states to independently generate, transmit, distribute, and regulate power, marking a departure from the centralized authority previously held by the Nigerian Electricity Regulatory Commission (NERC).

Four additional states—Lagos, Ogun, Niger, and Plateau—are expected to complete their transitions by September 2025, while Anambra is preparing to join after enacting its own electricity law.

The move aims to foster a competitive market and address Nigeria’s persistent power shortages but has sparked concerns about state capacity, regulatory consistency, and potential disparities in electricity access.

The Electricity Act 2023 enables states to issue licenses to private investors for power projects, encouraging localized solutions and investment. For example, Lagos has launched plans for 500-megawatt power hubs to boost energy reliability. Distribution companies in transitioned states, such as Enugu Electricity Distribution Company, have established subsidiaries like Mainpower Electricity Distribution Limited to operate under state regulations.

At a recent stakeholders’ meeting in Lagos, discussions focused on the need for capacity building, regulatory alignment, and investment readiness to ensure sustainable state-led markets. Eleven states are currently transitioning, with NERC providing guidance to navigate challenges.

However, industry experts warn that many states lack the technical expertise to handle complex tasks like setting cost-reflective tariffs, a skill globally limited to a small pool of professionals. Manpower shortages and weak institutional frameworks could undermine the transition. Asset delineation—dividing infrastructure like transmission lines that span multiple states—poses another hurdle, potentially causing regulatory conflicts.

Electricity theft remains a concern, as state regulators may lack the enforcement capacity to address violations effectively, especially since NERC must now transfer such cases to state commissions.

A critical issue is subsidies, with governors deciding whether to fund electricity subsidies or adopt market-based pricing.

This could lead to unequal access, as wealthier states may afford subsidies while others impose higher tariffs, impacting low-income households. Enugu stands out as a leader, with an experienced regulator and operational framework, while other states face early challenges.

Critics caution that fragmented oversight risks inconsistent standards and consumer exploitation, urging harmonized policies to maintain fairness.

The Act also promotes renewable energy and private investment, with provisions for tax incentives and rural electrification initiatives to expand access.

Since April 2024, NERC has issued transfer orders to 11 states, each with a six-month timeline for full operational handover.

As Nigeria navigates this transformative period, the success of state-led electricity markets depends on addressing capacity gaps, ensuring regulatory clarity, and fostering federal-state collaboration to deliver reliable, affordable power to millions.