For decades, Nigeria’s persistent power shortages have stood as a major obstacle to economic growth, industrial expansion, and improved living standards. Frequent outages and limited access to electricity have affected households, businesses, and public institutions alike. Recognizing the urgency of this challenge, the Federal Government took a bold and strategic step in July 2022 with the passage of the Electricity Bill, amending the Electricity and Power Sector Reform Act of 2005. This landmark legislation, now known as the Electricity Act, has been signed into law by President Bola Ahmed Tinubu. The President has done well in assenting to this Act, as it signals strong commitment to reforming the power sector and advancing Nigeria’s long term sustainable development agenda.
The Electricity Act introduces comprehensive reforms designed to transform the structure and performance of the power sector. A key provision of the Act is the removal of limitations associated with tenured licenses, a change intended to encourage greater participation in electricity generation, transmission, and distribution. By opening the market to more players, the Act promotes competition, efficiency, and innovation. It also provides for business continuity and government intervention where necessary, ensuring that electricity supply is not disrupted in cases of license revocation, financial distress, poor performance, or managerial failure.
In a bid to protect consumers and promote fairness, the Act operationalizes the Power Consumer Assistance Fund to support vulnerable electricity users while gradually eliminating cross subsidies. This approach aims to create a more transparent and equitable pricing system. The Act also strengthens consumer protection mechanisms and introduces strict penalties for electricity theft and related offences, reinforcing accountability across the value chain. Furthermore, increased funding for rural electrification is expected to expand electricity access to underserved and remote communities, reducing inequality and supporting inclusive development.
One of the most forward looking aspects of the Electricity Act is its strong emphasis on renewable energy. By encouraging the integration of renewable sources such as solar, wind, biofuel, and geothermal energy into Nigeria’s energy mix, the Act aligns power sector reform with environmental sustainability. This policy direction not only reduces dependence on fossil fuels but also positions Nigeria to attract investment into the fast growing renewable energy market, creating jobs and supporting climate action.
The implications of the Act extend beyond the power sector into the wider economy. The de monopolization of electricity generation, transmission, and distribution at the national level is expected to create a more competitive market and improve service delivery. Distribution companies can now adopt franchise models, upgrade infrastructure, and establish subsidiaries for intra state electricity distribution. However, the transition may also bring short term challenges. Higher electricity tariffs, combined with the removal of fuel subsidies, foreign exchange reforms, and increased value added tax on diesel, could raise operational costs for businesses and manufacturers, with possible effects on prices and economic activity.
For consumers, rising electricity and fuel costs may encourage a shift toward renewable and alternative energy solutions. The Act empowers communities, individuals, and private entities to develop their own power plants and mini grids, increasing energy self sufficiency and resilience. While higher tariffs may reduce purchasing power and increase the cost of living in the short term, these changes also reflect a move toward a more sustainable and cost reflective electricity market.
From an environmental standpoint, the Electricity Act offers clear benefits. Increased reliance on renewable energy will help reduce greenhouse gas emissions and environmental degradation, supporting Nigeria’s climate commitments. The gradual transition from fossil fuel based power generation to cleaner energy sources promises both environmental protection and long term economic gains.
Businesses and manufacturers are likely to experience both opportunities and adjustments under the new regime. While increased electricity costs may initially affect production and profitability, the Act creates space for innovation, private sector participation, and investment in alternative energy solutions. Over time, the empowerment of individuals and companies to generate their own electricity may reduce dependence on costly generators, especially in the absence of fuel subsidies.
For government, the Act represents an opportunity to achieve fiscal savings through full deregulation and subsidy removal. These savings can be redirected to critical sectors such as infrastructure, education, and healthcare. State governments, now empowered to regulate certain aspects of electricity within their jurisdictions, can develop competitive legal frameworks, partner with local and foreign investors, and grow their internally generated revenues.
In conclusion, the Electricity Act marks a decisive shift from years of power sector stagnation toward a future of reliability, competition, and sustainability. President Tinubu’s decision to sign the Act into law is commendable and timely, as it sets Nigeria on a clear path from darkness to development. While the reforms come with challenges, effective implementation and collaboration among stakeholders will be essential to fully realize the promise of reliable electricity, economic growth, and sustainable development for all Nigerians.
By Bola Babarinde
