New Electricity Law Yet to Spark Change

Concerns are mounting over the failure of some state governments to seize the opportunity to develop independent power systems, following the decentralisation of electricity through the New Electricity Act of 2023, writes Festus Akanbi

Nigerians are worried that despite the constitutional amendment that empowers states to generate, transmit and distribute electricity within their jurisdictions, the nation’s economy continues to stagger under the crippling weight of inadequate power supply.

Under the current dispensation, large and small businesses are suffocating in darkness, forced to rely on costly and unreliable alternatives like diesel generators, which eat deep into profit margins and stifle growth.

The promise of decentralisation remains largely unfulfilled as bureaucratic inertia, lack of investment, and poor regulatory coordination frustrate meaningful progress. This energy dysfunction undermines productivity and industrial expansion and reinforces Nigeria’s image as an economy stuck in reverse gear, rich in potential, yet persistently underpowered.

New Electricity Act

In June 2023, President Bola Tinubu signed a new Electricity Act into law to give states the power to generate, transmit and distribute electricity within their jurisdiction. This, Nigerians believe, would help in proffering lasting solutions to the electricity problems in Nigeria.

The 2023 Electricity Act is a replacement for the Electricity and Power Sector Reform Act of 2005 and was meant to bring about the de-monopolisation of Nigeria’s electricity generation, transmission, and distribution of electricity at the national level and empower states, companies, and individuals to generate, transmit and distribute electricity.

The law further provides that the funds set aside for the development of host communities will be received, managed, and administered for infrastructure development in the host communities by a reputable trustee/manager to be jointly appointed by the respective GENCO and their host community.

It created a scenario whereby states are empowered to generate, transmit, distribute, and regulate electricity within their borders and only submit to national oversight by the Nigeria Electricity Regulatory Commission (NERC).

 The Waiting Game

On paper, at least six Nigerian states of Abia, Delta, Nasarawa, Jigawa, Ondo, and Edo, have implemented functional independent or off-grid generation projects separate from the national grid as of June 2025.

Last week, the Nigerian Electricity Regulatory Commission (NERC) confirmed that Abia State has joined about a dozen other subnational governments in their bid to exercise regulatory oversight over the electricity market in their respective domains.

 The independent or off-grid generation projects vary from large CNG IPPs to modest solar mini‑grids, but collectively they mark a significant move toward decentralised energy generation.

However, despite the commendable efforts by states like Abia, Delta, Nasarawa, Jigawa, Ondo, and Edo to establish independent or off-grid power generation projects, the impact on residents and businesses has remained limited and largely symbolic.

Many of these projects, though operational, cover only select locations such as government facilities, markets, or a few rural communities, leaving the wider population trapped in chronic power shortages.

In Abia, for instance, the Ariaria market project benefits traders, but most homes and SMEs in the state remain underserved.

Similarly, while Edo boasts large-scale plants like Azura-Edo and Ossiomo, power supply to the average household remains erratic due to poor last-mile distribution and inadequate infrastructure. In Nasarawa and Jigawa, solar mini grids reach only a fraction of rural communities, while urban centres continue to rely on generators. The situation is no different in Delta and Ondo, where energy access outside project zones remains insufficient to drive industrial growth or reduce the cost of doing business. This disconnect underscores the urgent need for scale, integration, and strategic investment if these state-led power initiatives are to translate into real socio-economic transformation.

The Facilities

Meanwhile, on paper, the Ariaria Market Independent Power Project in Aba, Abia State, provides electricity to over 4,000 shops, deployed under the Federal Rural Electrification Agency’s (REA) off‑grid programme. Additionally, the “Aba Power Project” (a 181 MW embedded, privately operated plant) supplies power locally, typically independent of the national grid.

In Delta, the Asaba 8.5 MW Independent Power Plant (IPP) was commissioned in 2020 to power government infrastructure in Asaba. Mini grids were also initiated at universities in Delta (e.g. 1.6 MW at Federal University of Petroleum Resources, Delta State). Under the Nigeria Electrification Project (NEP), a grant was signed in January 2024 to deploy hybrid mini‑grids: 21 sites in Jigawa and 5 sites in Nasarawa. According to plans, this project will serve approximately 7,747 customers with off‑grid solar PV systems.

Ondo has a 20-kW mini‑grid in Ugbo‑Nla (2018), a 30-kW commercial mini‑grid in Obadore (2019), and a 56-kWp mini‑grid (2020), all operated by private developers.

For Edo, there is the Azura‑Edo Independent Power Plant in Benin City — a 461 MW gas‑fired facility that began operation in May 2018; Ossiomo Power Plant (95 MW) at Ologbo supplying the Government House, Enterprise Park, and more and under the REA’s programme, off-grid market and university energy schemes include Edo in Phase 1.

The question is to what extent these initiatives cover most of the people of the states whose businesses are being frustrated by the general shortage of electricity supply in the country.

Challenges

Many states find it difficult to generate their power due to the high cost of installing independent power generation. Power generation, especially at a meaningful scale, requires massive upfront investments in infrastructure, plants, transmission lines, and substations.

They pointed out that most states lack the fiscal capacity or creditworthiness to attract private-sector funding or secure long-term loans without federal backing.

Analysts also pointed out regulatory and bureaucratic delays as one of the problems. Sources say many states are still building the legal and regulatory framework (laws, commissions, agencies) needed to attract and regulate IPPs.

According to the report, the fact is even where generation is possible, the poor state of transmission and distribution infrastructure, which is still largely controlled by the federal government or DisCos, makes evacuation and delivery of power unreliable or economically unviable.

The report added that most state governments lack the in-house expertise to plan, structure, and manage complex energy projects, including PPAs (Power Purchase Agreements), risk mitigation, and sustainable off-take strategies. Given the fact that IPPs need guarantees: bankable tariffs, stable regulation, and assurance of payment, it is a setback that many state governments cannot provide sovereign guarantees or credit enhancements to attract private investors confidently.

Strain on Businesses

The lack of adequate power supply is crippling business activities and stunting economic growth at the state level. Without reliable electricity, businesses, especially small and medium-sized enterprises (SMEs), face soaring operational costs as they are forced to depend on expensive and often unreliable generators. This reduces productivity, shrinks profit margins, and discourages investment.

In Lagos, which is the economic capital of Nigeria, businesses are having a field day making substitutes for power as most offices are plunged into darkness. A huge amount of revenue goes to diesel as the distributing companies continue to operate unpredictably.

In industrial hubs like Kano, Aba, and Ogun, manufacturers operate below capacity due to erratic power, while artisans, welders, tailors, and cold-room operators lose work hours daily. The agriculture value chain is also disrupted, with perishable goods going to waste due to the absence of cold storage. Digital and tech businesses struggle with downtime and high costs of powering IT infrastructure, while service providers pass these costs on to consumers, leading to inflation.

This chronic power deficit limits job creation, weakens the tax base and makes state economies unattractive to investors, domestic or foreign. It also widens regional inequality, as states unable to guarantee steady electricity lose out to others making progress in independent power generation, such as Lagos or Edo.

In essence, without power, there is no real productivity, and without productivity, state-level economies cannot thrive, diversify, or lift citizens out of poverty.

State of Readiness

The Convener and Executive Director of PowerUp Nigeria, a power consumer advocacy group, Adetayo Adegbemle, raised concerns over the pace and seriousness of states that have taken up regulatory autonomy in the electricity sector following the decentralisation of electricity governance.

Speaking on the unfolding development, Adegbemle said while the decision to decentralise electricity regulation was a welcome and progressive one, many of the states that sought autonomy seemed unprepared for the practical responsibilities that come with it.

According to him, the decentralisation process is not an easy path and requires significant groundwork, from setting up institutions to training personnel and developing regulatory models tailored to local realities.

He said some states are only just realising that once they take on this responsibility, electricity from the national grid will be invoiced at full cost, and they’ll need to decide whether to pass that cost to their residents or offer some form of subsidy. That realisation has caused many to pause.

Adegbemle said the remaining states were likely watching closely to see how the early adopters fared before making any move of their own.