- State governments in Nigeria plan to phase out electricity subsidies, criticising their inefficacy in improving service quality.
- States will establish power market regulations, shifting authority from the Nigerian Electricity Regulatory Commission.
- States aim to implement efficient and cost-reflective electricity tariffs.
According to a new document from the Nigeria Governors’ Forum (NGF), state governments across Nigeria plan to phase out electricity subsidies. They aim to transition to independent power markets under their laws.
The document “Development of the National Integrated Electricity Policy and Strategic Implementation Plan” urges the Federal Government to continue addressing the N4 trillion legacy debts in the power sector while advocating the end of federal subsidies. The NGF has criticised federal interventions over the past 15 years.
They argue that these subsidies have failed to improve service quality and have disproportionately benefited grid-connected customers while neglecting millions in underserved areas.
These recommendations align with the Electricity Act (EA) 2023, which repeals the Electric Power Sector Reform Act. The EA 2023 establishes a dual framework for the Nigerian Electricity Supply Industry (NESI): a federal wholesale market and state-level retail markets.
This act transfers regulatory powers from the Nigerian Electricity Regulatory Commission (NERC) to newly formed State Electricity Regulatory Commissions, contingent upon states fulfilling transition requirements.
Governors stressed that consumers should pay for electricity as a commodity. They called for minimising and eliminating subsidies, except for specific consumer categories.
They also proposed that federal subsidies should be transparent, with a clear regulatory framework determining their application and extent. Federal and state collaboration is crucial for managing subsidies within state electricity markets.
The Federal Ministry of Power received the NGF document and acknowledged states’ newfound legislative autonomy over electricity regulation.
Minister of Power Adebayo Adelabu recently highlighted the unsustainable gap between budgeted funds and actual subsidy requirements. He noted that N450 billion had been allocated for subsidies in the 2024 budget, against a requirement of nearly N3 trillion.
The NGF recommended that states implement efficient and cost-reflective tariffs and urged the Federal Government to refrain from political interference in tariff setting.
The EA 2023, along with a constitutional amendment granting states the power to legislate on electricity matters, has prompted states like Enugu and Ekiti to establish their regulatory bodies. This marks a significant step toward decentralising Nigeria’s electricity market.
The NGF stated that states’ electricity laws must align with national regulations. They should not interfere with interstate or national grid operations. They called for federal support for states wishing to enact electricity laws and a clear framework. Which aims to manage the transition to state-regulated electricity markets.