Concerns Over Electricity Act Amendments and Sector Reforms
A former Chairman of the Senate Committee on Power, Senator Gabriel Suswam, has raised concerns about the ongoing amendments to the Electricity Act 2023, warning that some proposed changes could significantly alter the original objectives of the reform. He emphasized that these amendments risk distorting the foundational framework of the landmark legislation.
Suswam also highlighted the need for the Federal Government to create a more enabling environment for investors and address funding challenges that are hindering progress in the sector. His remarks were made during the 20th anniversary celebration of the Nigerian Electricity Regulatory Commission (NERC) in Abuja, an event themed “Strengthening Power Sector Governance for a Sustainable Future.”
The Need for Targeted Amendments
Speaking at the event, Suswam pointed out that some of the proposed amendments currently being discussed in the National Assembly are too comprehensive and may not align with the areas that require attention. He warned that these changes could undermine the original intent of the Electricity Act, which was designed to strengthen the power sector, decentralize regulation, and attract private investment.
He explained that while certain sections of the law might need review, the amendments should be targeted and specific rather than sweeping changes that could destabilize the entire framework. “Changing broad sections of the Act is like rewriting the constitution; it destroys the foundation,” he said.
The Role of NERC and Political Interference
Suswam stressed the importance of NERC maintaining its independence from political interference, as the Electricity Act was intended to grant the commission autonomy and strengthen its oversight of the power industry. He expressed concern that the current legislative process could lead to the creation of a new law rather than an amendment to the existing one.
The senator also reflected on the history of Nigeria’s electricity reforms, tracing them back to the unbundling of the National Electric Power Authority under the Olusegun Obasanjo administration. He noted that the 2023 Electricity Act aimed to decentralize the power sector and empower states to generate, transmit, and distribute electricity independently.
Challenges in Private Investment and Monetary Policy
Suswam warned against the rush by states to establish regulatory commissions without adequate technical capacity, cautioning that such moves could worsen inefficiencies rather than solve them. He compared regulation to training a medical doctor, emphasizing that expertise is essential for effective oversight.
He also criticized the high benchmark interest rate set by the Central Bank of Nigeria, currently around 27 per cent, which he argued makes financing for power projects nearly impossible. “There’s no way our banking sector can finance the power industry with lending rates of over 30 per cent,” he said.
Suswam called for the creation of sector-specific financing mechanisms, such as a dedicated “power bank” similar to India’s model, to support long-term infrastructure investments. He urged the government to consider the adverse effects of tight monetary policies on sectors that drive industrialization and employment.
Coordination Between Power and Gas Sectors
Suswam also advocated for the merger of power and gas portfolios under a single Ministry of Energy, arguing that Nigeria’s electricity challenges cannot be solved in isolation from gas pricing and supply issues. He pointed out that the same gas used in Nigerian power plants is also sent to Ghana, where stable electricity is achieved due to appropriate pricing.
Call for Deliberate Reforms and Investor-Friendly Policies
Suswam concluded by urging the Tinubu administration to move beyond rhetoric and demonstrate a serious commitment to attracting investment. He emphasized that deliberate reforms, including stable regulation, investor-friendly policies, and affordable financing, are essential for Nigeria to achieve industrial progress similar to that of peer nations.
Progress and Challenges in State Regulation
Earlier in his address, NERC’s Vice Chairman, Mr Musiliu Oseni, reviewed the commission’s progress over the past two decades. He noted that 15 states have received transfer orders to establish their own regulators, with only eight currently operational. He urged new state regulators to maintain professionalism and independence, warning that regulation must be grounded in technical competence rather than politics.
Oseni also called for a policy rethink to ensure effective utilization of the various funding pools available to the Nigerian renewable energy space through the Rural Electrification Agency. He highlighted the significance of the $2 billion fund, which includes contributions from the World Bank, African Development Bank, and other international institutions.
Standardization and Interoperability in State Markets
The Minister of Power, Adebayo Adelabu, emphasized the need for standardization and interoperability as states develop their markets. He explained that the Electricity Act empowers states to leverage their unique resources—such as solar, hydro, or wind—to build grids that serve their specific economic and social needs.
The Director of Distribution, Umar Mustapha, added that NERC’s efforts to coordinate with state regulators are critical for national cohesion. He described the shift from a single national grid to multiple, integrated sub-national markets as a game-changer, highlighting the importance of strategic harnessing of these opportunities.
