Nigeria is gradually becoming an energy investment hub as most investors who were initially uncomfortable with existing fiscal policies and unwilling to invest are gradually pushing to raise funds to gain prominence in the energy sector.
As it is today, firms are looking towards investing across the energy value value to provide energy to the country battling huge energy gap.
Thanks to the foresight of President Bola Ahmed Tinubu, who has just assented to the Electricity Act 2023 which was initially passed by lawmakers in July 2022.
The Electricity Act will replace the Electricity and Power Sector Reform Act of 2005. It provides a framework to guide the post-privatisation phase of the Nigerian Electricity Supply Industry (NESI) as well as encourage private sector investments in the sector.
Highlighted below are some of the functions the Electricity Act seeks to guide-state electricity empowerment
The de-monopolisation of Nigeria’s electricity generation, transmission, and distribution of electricity at the national level empowers states, companies, and individuals to generate, transmit and distribute electricity.
Under the Act, states can issue licenses to private investors who can operate mini-grids and power plants within the state. However, the Act precludes interstate and transnational electricity distribution.
Under the Electricity Act 2023, the Nigerian Electricity Regulatory Commission (NERC) will be able to regulate the electricity sector within Nigeria without prejudice to the powers of the states to make laws and create electricity markets within those states and to regulate those markets.
The Act mandates how NERC can transition regulatory responsibilities from itself to state regulators when they are established. Until a state has passed its electricity market laws, NERC will continue to regulate electricity business exclusively carried out in those states.
For now, Lagos, Edo and Kaduna states already have electricity market laws and can start regulating their market. But for other states without such laws, NERC will regulate.
The NERC will still carry out cross-border regulations – generation, and transmission across states will still be regulated by NERC.
The Act grants lawmakers the power to carry out oversight responsibilities and function over the NESI through its respective Committees on Power in the Senate and House of Representatives. This is to be carried out notwithstanding the supervisory powers of any government ministry over government-owned enterprises or other entities operating in the Nigerian electricity supply industry.
Also, electricity generation licensees are obligated to meet renewable generation obligations as may be prescribed by NERC. Under the Act, electricity generating companies will be mandated to either generate power from renewable energy sources, purchase power generated from renewable energy or procure any instrument representing renewable energy generation.
The Electricity Act also mandates the imposition of renewable purchase obligations on distribution or supply licensees.
The Act also states that anyone may construct, own or operate an undertaking for generating electricity not exceeding 1 megawatt (MW) in aggregate at a site or an undertaking for distribution of electricity with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, or such other capacity as NERC may determine from time to time, without a license.
In a quick response to this the governor of Osun State, Senator Ademola Adeleke, has disclosed plans by his administration to develop a plan of action for the making of Osun State Electricity Market Policy and Legislation.
Speaking on recent signing into law of a constitutional amendment empowering state governments to regulate electricity market within their boundaries, Governor Adeleke in a statement directed the setting up of a technical committee to prepare the state policy plan on the management of state power sector.
The governor noted that the committee is to come up with a detailed plan to create Osun State Electricity Market Policy and a draft Executive bill to be named Osun Electricity Act.
The new policy will also include creation of Osun State Electricity Regulatory Commission to issue licences to private firms ready to engage in power production and regulate interface among operators within the power sector from the power generators, distributors and the consumers.
The planned policy will also facilitate private sector investment in the state electricity sector, encourage alternative energy sources from renewable to other green power sources, the statement noted.
Other part of the plan is to electrify Osun programmes to ensure all towns and villages in Osun are provided with power supply from mini-dams to other sources of energy.
Governor Adeleke, who promised to inaugurate the committee soon also expressed the intention of his administration to seek the support of the National Electricity Regulatory Commission (NERC) on the state electricity market plans.
The chief executive informed the state that the executive bills he will soon be submitting to the legislature include the Osun State Startup bill, the Osun State Climate Action Bill and the State Electricity Market Bill.
Meanwhile, key stakeholders in the electricity industry who spoke with NATIONAL ECONOMY, have predicted an enhanced inclusive growth, economic competitive indexes after former President Muhammadu Buhari assented to 16 constitution alteration bills.
The signed bills include devolving more power to state governments, especially granting them autonomy to generate electricity, a move that will break the monopoly of the federal government in power generation, transmission and distribution.
Former ministers of power, Professor Barth Nnaji and Dr. Olu Agunloye, said the country would now begin to see huge investment in power generation and the much anticipated competition in the industry.
Nnaji said that states like Lagos, Rivers and Akwa Ibom that had spearheaded the drive for autonomous power structures would substantively create better opportunities and environment that will drive economic growth.
The former minister said states would no longer apply for licences to generate own power and they would now have the latitude to regulate generation, distribution and transmission, adding that they would now have the opportunity to create end-to-end alternative power transmission lines.
He, however, stated that states that are not liquid enough will have challenges raising the required capital to invest in the sector, stating that it will cost about $150-$200 million to develop a 100 Megawatts power generation plant.
Nnaji did not see conflict in regulations, as he said the Nigerian Electricity Regulatory Commission (NERC), would oversee the national grid system, while the state’s electricity regulatory bodies will regulate activities at the state level.
This, he said, will enable interswitch opportunities that will reduce outages frequently triggered by grid system collapse.
On his part, Dr. Agunloye applauded the move, saying it will help liberalise the industry.
Agunloye said that while he was minister, he pursued the policy of throwing the market open but the system did not allow devolution of power to states.
He said what the nation had yearned to implement when the late former minister of power, Bola Ige, and Segun Agagu, took up the responsibility to drive privatisation is now about to thrive.
On his part, the president, Nigeria Consumer Protection Network (NCPN), Kunle Kola Olubiyo, described the constitutional alterations as unprecedentedly a bold and right step in the right direction.
Olubiyo, former member, Presidential Ad-hoc Committee on Review of Electricity Tariff in Nigeria, pointed out that the over concentration of power and management of natural resources cum economic activities in the hand of the federal government, particularly in areas where the 36 states could do better, had over the years stifled competition.
He said, “The recent development would no doubt enhance inclusive growth, upscale global economic competitive indexes, break the monopoly of the federal government in power generation, transmission and distribution, rail transport system, upstakes end users customers right to choices/ alternatives while at the same time strengthen cash inflow from foreign direct investment (FDIs).”
He also said it will also partly fulfill the aspirations and yearnings of the quest for resource control and true federalism.
Our correspondent reports that, President Muhammadu Buhari assented to 16 constitution alteration bills. The signed bills include devolving more power to Nigerian states, empowering them to take charge of their growth and granting them autonomy in major areas like electricity, railways, and the judiciary.
Since Nigeria transitioned into a democratic government, there have been efforts to move these items from the exclusive list, which puts them solely under the aegis of the federal government, to the concurrent list, which grants states autonomy over them. But all efforts had proven abortive.
The new bill is expected to significantly promote local economic growth and development across all identified quarters, but one which stands out is the anticipated transformation in the power sector. The fifth alteration bill no. 33, Devolution of Powers (National Grid System), allows Nigeria’s 36 states to generate, transmit, and distribute electricity in areas covered by the national grid.
Nigeria is reportedly power-deficient country, yet it is endowed with large oil, gas, hydro and solar resources, and it has the potential to generate 12,522 MW of electric power from existing plants.
According to the World Bank, about 85 million Nigerians (43 per cent of the population) do not have access to grid electricity, making it the country with the largest energy access deficit globally.
Despite the privatisation of the power sector in 2013, expected to herald a positive transformation, it continues to perform abysmally. Ten years after, the “Giant of Africa” is yet to generate up to 6,000MW for its over 200 million citizens.
As the states now have been granted autonomy for power generation, there are high hopes that the power sector, which has suffered long-standing problems related to inadequate infrastructure, unreliable electricity supply, and a lack of investment, would be revived.
Lagos, the commercial nerve centre of Nigeria, has been optimistic about the bill before now and had launched an electricity policy, published its off-grid strategy, presented its Integrated Resource Plan and drafted a law to establish what it calls the Lagos Electricity Market (LEM). States have always had the legal right to distribute electricity but were limited to areas off the national grid. And this is why, although Lagos pioneered electricity sector reform on the continent by unbundling its single state-owned electricity company starting in 2001, the LEM did not materialise majorly because of regulatory constraints.
NATIONAL ECONOMY check reveals that at the moment more credible and innovative investments are emerging from key private sector operators aiming to deal with Nigeria’s energy problems.
In a significant stride towards innovative sustainable development, SECTOR LEAD LLC, a leading innovative solutions technologically driven company, is set to unveil its groundbreaking Waste to Energy Project in Nigeria, aimed at addressing the nation’s waste management and energy challenges.
The initiative, a pioneering step, marks a remarkable milestone in Nigeria’s efforts to combat waste management challenges and embrace clean energy solutions.
In a statement from GREENPLINTH AFRICA, Strategic Partners to SECTOR LEAD, the Waste to Energy Initiative is a national project, programmed for Abuja and the 36 states of the federation.
The Waste to Energy Project aims to tackle two critical issues facing Nigeria – the growing waste management crisis, and the need for reliable and sustainable energy sources.
Nigeria, a country with a rapidly expanding population and urbanization, has struggled with waste management, leading to pollution, health hazards, and inefficient resource utilization. This visionary project aims to convert waste materials into valuable energy resources, reducing the burden on landfills, and providing sustainable electricity for communities.
According to Mr. Adedayo Mustapha, Chief Executive Officer of SECTOR LEAD, the company is well prepared to revolutionize the waste management landscape in Nigeria through its Innovative Waste to Energy Project.
SECTOR LEAD is ready to implement this initiative which aims to transform the nation’s abundant waste resources into clean energy in all regions across Nigeria, starting with Abuja.
The objective of the Abuja pilot project is to build an innovative system for waste management, to better the environment and create value for all waste generated. Energy will become a by-product of this waste management system, generating a minimum 50 Megawatts of clean electricity, and culminating into the delivery of The First Zero Waste Green Smart Sustainable Federal Capital Territory in Africa – the first of its kind.
Mustapha listed some of the key features of the waste to energy project as State-of-the-art Integrated Waste Management; Environmental Sustainability; Jobs Creation & Socio-Economic Benefits; Clean Energy Generation; Community Engagement & Awareness; and Sustainable Transformative Health Benefits for all.
Also speaking about the waste management project, the Director General of Nigeria’s National Council on Climate Change, Dr. Salisu Dahiru, expressed optimism about its potential impact.
He stated, “This transformative project represents a significant milestone in Nigeria’s journey towards sustainable development and Net Zero. By harnessing the power of waste, we can address pressing environmental challenges while creating a cleaner, greener, and more prosperous future for all Nigerians.” Speaking further, he revealed that Nigeria is currently at the forefront of regulating Methane Emissions in Africa. “This project has a lot of Methane-to-Market potential that will be of great economic benefit to the project’s promoters, investors and Nigeria. The investment opportunities in this project are enormous.” he concluded.
SECTOR LEAD is championing innovative waste management in Nigeria; with a combo of technologies, this initiative holds tremendous promises, offering a tangible solution to waste management challenges, while simultaneously contributing to Nigeria’s energy transition and sustainable development goals.
Also, Shell funded impact investment company, All On, through its Demand.
Aggregation for Renewable Technologies (DART) program, has announced its commitment of $11 million to support 25 mini-grid projects in Nigeria.
This was made known at an inaugural DART workshop with off-grid developers, commercial banks, domestic investors, and other critical stakeholders to discuss strategies to unlock local currency commercial funding for the off-grid renewable energy sector in Nigeria.
During her remarks, Caroline Eboumbou, CEO of All On, highlighted the remarkable success achieved through the DART program since its launch in 2021.
She stated that the program has committed a total of $11 million to support 25 mini-grid projects across the country, over 2,700 solar energy systems to be funded, and 12 successful applications thus far.
Efforts have been made to increase the funding of the facility by $15 million, in collaboration with its partner, Global Energy for People and Planet (GEAPP). These efforts aim to address the local financing bottlenecks experienced by developers and ensure that affordable, high-quality solar products reach the
communities most in need in Nigeria.
“While celebrating these achievements, we also acknowledge that challenges have arisen along the way.
In collaboration with our partners at GEAPP, we are actively working to address these challenges. We have made significant progress in simplifying the application process and reducing the timelines from application to disbursement.
“Additionally, we have expanded the eligibility scope to include Solar Energy
Systems, Standalone Systems for Productive Use (SSPU), and Commercial and Industrial (C&I) developers,” she said.
In November 2021, All On, in partnership with GEAPP set up the DART program, a $10 million financing facility designed to accelerate the growth of the renewable energy sector in Nigeria and beyond.
It achieves this through a combination of demand pooling, aggregated purchasing of solar equipment, access to affordable finance, and streamlined logistics processes.
By leveraging economies of scale, the DART program aims to reduce costs for solar companies and end users while promoting the adoption of renewable energy.
Explaining why DART program is crucial for the renewable energy ecosystem in Nigeria, “firstly, it allows small-scale developers to benefit from group purchasing, resulting in lower unit costs for solar equipment.
Secondly, it addresses the issue of foreign exchange availability, alleviating the FX bottlenecks experienced by developers.”
“Moreover, the program offers additional benefits such as a streamlined procurement process, expedited deployment of off-grid assets, access to affordable financing for developers, and the potential for resultbased subsidies and other commercial financing options.” – said Caroline Eboumbou, All On CEO.
The workshop encompassed a series of presentations addressing key aspects of Nigeria’s macroeconomic climate and its impact on the renewable energy industry within the country.
Topics covered included the sector’s roadmap, challenges faced, and a plenary session that focused on strategies for unlocking local commercial financing.
Another interesting consideration is by Canadian energy firm, WATT Renewable Corp. which is working towards raising about $100 million by the end of 2024 to expand its business of providing solar power, mainly to telecommunications towers in Nigeria.
The Company which has installed 12 megawatts of generation capacity at about 160 sites, has a pipeline of projects 10 times that size, Chief Investment Officer Sherisse Alexander said.
WATT would prefer a major investor to take a stake, but will finance projects individually if need be, she said.
“What we are looking at is a corporate raise,” Alexander said. WATT is talking to “companies that are already involved in the energy industry that have an understanding of renewable energy and specifically the African market,” she said, declining to be more specific.
WATT is one of a number of energy startups trying to provide power solutions in Africa, where about 600 million people, or half the population, have no access to electricity. Businesses across the continent are offering services ranging from mini-grids to small hydro plants to reach areas that aren’t connected to national grids.
The Company, which entered the West African market in 2018, initially planned to set up mini-grids for rural communities, but soon saw the opportunity to provide reliable power systems for corporate customers.
“We made our foray into the telecommunications industry where we transition telecommunication providers and towers from diesel-generated power over to a solar hybrid solution,” Alexander said.
One of its main customers is Pan African Towers Ltd., a Nigerian provider of masts. In addition to telecommunications, WATT has also focused on financial institutions, and some commercial and industrial companies.
The Company lists 401 projects on its website, some of which are up and running, but most are in development. Of those all but 14 are in Nigeria, with the company having 13 projects in Canada and one in Texas.
The need to raise money means that shareholders, including founder and Chief Executive Officer Oluwole Eweje, will reduce their stakes.
“Given the capital that we are looking to raise for our extensive pipeline of business, their shareholding will be diluted,” Alexander said. “It is in the best interest of future project development and deployment.”
Meanwhile, the Federal Government has been advised to accelerate the Presidential Power Initiative to upscale power supply in the country.
In addition, State governments and private investors should be supported to leverage the decentralization power supply and off grid power solutions.
Giving the advise, in a paper titled “FUEL SUBSIDY REMOVAL: ENSURING INCLUSIVE, IMPACTFUL AND SUSTAINABLE PALLIATIVE MEASURES” by the Center For The Promotion Of Private Enterprise, CPPE, which analysed the impact of petrol subsidy withdrawal, its Chief Executive Officer, CEO, Muda Yusuf, pointed that quick wins in the power improvement strategy should be implemented immediately to reduce the demand for petroleum products [petrol and diesel] for purposes of electricity generation by households and businesses.
In particular, Yusuf, urged Government to urgently consider putting an end to the pricing of gas in dollars for domestic use, especially for manufacturers.
According to him, “Necessary urgent steps must be taken by government to put an end to this dollarization framework to ensure a moderation in energy cost for the manufacturing sector, adding that Government should take urgent steps to reduce the cost of Liquified Petroleum Gas, LPG to households.
He expressed happiness with the recent reduction in the LPG price but said the price reduction trajectory should be sustained to ease pressure on households and prevent deforestation.
Yusuf also called for the introduction of incentives to stimulate private investment in pipelines as this would sufficiently reduce distribution costs of petroleum products.
He again called for the abolition of all forms of taxes and import duty on renewable energy equipment to boost the adoption of renewable energy by households and SMEs. Such waivers would make renewable energy adoption affordable, adding, “This reduction should cover relevant equipment like solar panels, inverters, batteries etc. This would make citizens less reliant on the electricity grid.”
