Nigeria’s Electricity Act: Can State Power Drive the Energy Transition?
Nigeria’s Electricity Act (2023) is one of the most significant reforms in the country’s power sector in nearly two decades. By transferring regulatory authority from the federal level to the states, it introduces a new governance model, one that could redefine how electricity is generated, distributed, and financed across the country.
But this shift raises a critical question:
Will decentralisation accelerate Nigeria’s energy transition or fragment its electricity market?
A governance shift at the core of reform
For years, Nigeria’s electricity challenges have been framed in terms of infrastructure deficits, financing gaps, and technical inefficiencies. Yet, at the heart of these challenges lies a deeper issue: governance.
The Electricity Act fundamentally restructures this governance model.
States are now empowered to:
Establish electricity markets
Create regulatory institutions
Issue licenses for power generation and mini-grids
Oversee electricity distribution within their jurisdictions
This marks a transition from a centralised system to a multi-level governance framework, where both federal and state actors shape market outcomes.
Crucially, the Act also embeds renewable energy into this new system, supporting mini-grids, embedded generation, and distributed energy solutions that are essential for expanding access.
States as new drivers of energy transition
Early implementation suggests that states are not merely absorbing regulatory powers; they are actively using them to shape energy markets.
Lagos State is developing a structured electricity market under its regulatory commission, with ambitions to deliver up to 6 GW of capacity through a mix of gas and renewable energy.
Oyo State is prioritising access through a planned rollout of 40 mini-grids and a 500 MW generation target by 2027.
Abia State has introduced a dedicated mini-grid regulatory framework to attract private investment.
Ondo State is leveraging partnerships with the Rural Electrification Agency to accelerate rural energy access.
Bayelsa State is linking decentralisation with industrial policy through a planned 100 MW solar manufacturing facility.
These examples highlight a broader shift:
States are becoming active market shapers, not just policy implementers.
A new incentive landscape for renewables
Decentralisation is also changing how renewable energy projects are developed.
By enabling states to design their own regulatory frameworks, it:
Reduces bureaucratic bottlenecks
Aligns policies with local demand conditions
Encourages distributed energy solutions
This is particularly important in a country where grid expansion alone cannot meet demand. Mini-grids and decentralised systems are increasingly emerging as practical pathways to expand electricity access.
At the same time, federal programmes such as the Nigeria Electrification Programme (NEP) and the World Bank-supported DARES initiative continue to play a critical role by providing financing and technical support.
Together, these dynamics are creating a more distributed and flexible energy system.
The risks: fragmentation and uncertainty
However, decentralisation is not without risks.
The emergence of multiple regulatory authorities introduces new challenges:
Overlapping mandates between federal and state regulators
Divergent tariff structures and licensing frameworks
Uneven institutional capacity across states
These factors could increase compliance complexity for investors and create uncertainty in the market.
Without coordination, decentralisation risks replacing a single imperfect system with multiple fragmented ones.
What this means for investment
The reform is already reshaping how investors approach Nigeria’s electricity sector.
Opportunities are expanding in:
State-level electricity markets
Mini-grid and off-grid systems
Embedded generation projects
But investment decisions remain highly sensitive to:
Regulatory clarity
Policy consistency
Harmonisation across jurisdictions
Without these, decentralisation could increase transaction costs and slow the pace of clean energy deployment.
A conditional pathway forward
Decentralisation, on its own, is neither a guarantee of success nor a source of failure.
Its impact will depend on how effectively Nigeria manages:
Coordination between federal and state institutions
Capacity development at the subnational level
Regulatory consistency across markets
The shift toward state-level governance reflects a recognition that centralised systems have struggled to deliver reliable electricity.
But decentralisation introduces a new test:
Nigeria’s energy transition will be determined not by the ambition of reform, but by the effectiveness of governance across its states.
Read the full research brief
This article draws from our latest Energy Transition Africa research brief exploring how subnational regulation is shaping Nigeria’s energy transition. Download the full report below
