Decentralisation Of Nigeria’s Electricity Sector Faces Setbacks As States Struggle With Regulation Gaps, Systems, And Poor Investment

Decentralisation of Nigeria’s electricity sector faces setbacks as states struggle with regulation gaps, systems, and poor investment A growing crisis is threatening Nigeria’s efforts to improve electricity supply through regulatory decentralisation, as more than 16 states that have assumed regulatory powers are failing to establish effective frameworks to regulate electricity markets within their borders. The decentralisation initiative, introduced under the Electricity Act 2023 to bring electricity regulation closer to consumers, is now facing serious implementation constraints that could worsen consumer experience, dampen investment, and deepen governance gaps in the nation’s power sector. Sources at the Nigerian Electricity Regulatory Commission (NERC) say several subnational governments have not set up fully functional State Electricity Regulatory Commissions (SERCs), a key component of the Electricity Act’s decentralisation architecture. In some states including Ogun, Imo, and Edo licences for electricity operations are reportedly being issued outside the established legal and regulatory framework, raising legal and market credibility concerns. NERC officials warn that where regulatory structures are not operational, consumers could face a vacuum in dispute resolution and market oversight as federal offices in those states close down following the transition. Investment into new generation, transmission and distribution assets at the subnational level is also projected to be weak, as costs remain high and technical expertise limited, undermining the potential benefits of decentralised markets that aimed to boost local capacity and service reliability. At a recent electricity governance workshop held in Ibadan, regulators and state power officials from Oyo, Ondo, Ekiti, Lagos, Imo, Niger, and Plateau discussed some of the bottlenecks to effective decentralisation. While all parties agreed decentralisation offers opportunities for regulatory responsiveness, they noted significant structural weaknesses exposed by the transition so far. Under the decentralised model, state governments can establish regulatory bodies to oversee electricity markets within their territories a departure from the previous federal monopoly under NERC. States now with some form of statutory regulatory authority include Bayelsa, Lagos, Gombe, Kogi, Imo, Ogun, Ondo, Ekiti, Enugu, Niger, Edo, Oyo, and Plateau. However, many are still laying the groundwork for legal, technical, and operational systems In Abia State, the Abia State Electricity Regulatory Authority (ASERA) has licensed three state‑level distribution companies, while in Lagos, Governor Babajide Sanwo‑Olu inaugurated the board of the Lagos State Electricity Regulatory Commission (LASERC), a step toward building a modern, independent electricity market. Yet in other states like Ogun, NERC reports that electricity oversight has effectively stalled after the federal regulator closed its forum office, and electricity permits have been issued by political appointees rather than a legally constituted regulator a development that could undermine regulatory credibility and consumer protection. In Imo State, a similar situation is emerging. The state regulator reportedly granted a licence to a new operator without a clearly defined licensing process, raising questions about jurisdiction, market coherence, and regulatory oversight Experts and sector stakeholders warn that poorly formalised regulatory structures could lead to market distortions and legal challenges, especially where state regulation intersects with activities such as generation and transmission that remain under national purview. They urge clearer coordination mechanisms and legal reforms to prevent overlapping mandates between federal and state authorities.Addressing these governance gaps is now part of legislative deliberations, with a Senate Committee on Power confirming that the National Assembly is reviewing aspects of the Electricity Act to strengthen intergovernmental coordination, clarify regulatory boundaries, and improve sector outcomes. Despite the emerging challenges, some advocates stress that decentralisation remains a necessary pathway for long‑term reform, arguing that bringing regulatory decision‑making closer to consumers can ultimately improve accountability and service delivery, especially in underserved communities that national‑level regulation has historically struggled to reach. but decentralisation’s success hinges on swift capacity building, investment mobilisation, and robust legal frameworks that can withstand market pressures without compromising consumer interests or sector stability.