Nigeria’s Electricity Reform Journey — The Political Economy of Power, presented by Mr Eyo O. Ekpo, Team Leader – Power, United Kingdom Nigeria Infrastructure Advisory Facility
Electricity reform in Nigeria and probably elsewhere is 99% politics and 1% economics.
That 1% — the engineering, the financing, the tariff modelling, the training and human capacity development — is extremely important. But it is the 99% — politics, governance, the stakeholder engagement, the hard work of gaining and retaining credibility — that makes or breaks reform. This is the lesson of Nigeria’s electricity sector over the past 25 years. Let me trace the timeline.
In 2001 to 2007, we had the promise of reform. The National Electric Power Policy, 2000 set out a bold vision. The Electric Power Sector Reform Act (EPSRA), 2005 created the Nigerian Electricity Regulatory Commission (NERC), mandated the unbundling of NEPA and paved the way for privatisation. In that period, in early 2003, the EPSRA was passed by the National Assembly. For certain reasons that emerged later, President Obasanjo did not assent to the Act and it lapsed with the end of that session of the National Assembly in June 2003.
The Act was not passed again until March 2005 but by then we had lost the powerful momentum that brought together diverse stakeholders, particularly very credible domestic and foreign operators and investors, to support and participate actively in these reforms. This was compounded by the decision by President Umaru Yar’Adua in October 2007 to suspend the implementation of electricity reforms. The final blow was his inexplicable wholesale removal of the entire leadership – the Chairman and six Commissioners – of the Nigerian Electricity Regulatory Commission (NERC), an act that badly damaged the Commission’s credibility and independence.
2010–2015: The privatisation era. Assets were sold, expectations raised, but the foundations were weak. While the actual process of bidding and selling was very transparent, the quality of the buyers for the Distribution Companies left a lot to be desired and the advice from NERC that most of these “core investor groups” did not pass NERC’s “fit and proper” test was largely ignored by the National Council on Privatisation, yet another example of the 99%:1% equation. Let me hasten to add that, politically, there were two very good reasons to go ahead.
First, it was not clear that there were any serious foreign investors willing to take a bet on the Nigerian electricity sector, just as it was also not clear that there were credible Nigerian investors better than the group of preferred bidders for the Discos that we had at the time.
Second, in 2012, given the uncertainty even then that the Government of the day would win re-election in 2015, it was simply a case of now or never. In hindsight, given what has happened these past 12-13 years, I believe the decision to go ahead was justified, but whether this view is correct is a matter that will always generate heated discussion.
With transactions done and the distribution companies (Discos) handed over to the core investors, another even more serious and major challenge emerged; regarding the nature of corporate governance that was brought into the Discos. The reality is that the while the quality of almost all the preferred bidder groups left a lot to be desired, the same was true on the public sector side. Instead of focusing on turning around the Discos that they took over, the core investors chose to game the system and take full advantage of a Federal Government that had been made to think that Nigerians do not want electricity to be commercially priced but prefer for it to be subsidised; and whose watchdogs in NERC and in BPE were conspicuous in their failure to hold these Disco core investors to full account.
2016–2023: These were the crisis years. The system groaned under liquidity shortfalls, stranded capacity, and weak governance in both the public and private sector responsibilities. Tariffs were frozen by politics, post-privatisation monitoring was absent event though the Federal Government was fully represented on the boards of the Discos, investments consequently stalled, losses grew, debt and accumulated liabilities cascaded down the entire value chain and the entire Nigerian Electricity Supply Industry became an insolvent entity, held up only by Gencos and gas suppliers that delivered energy only out of patriotism and a refusal to do what commercial commonsense demanded.
In 2020 Nigerian Governors under the aegis of the Nigerian Governors’ Forum recognised very clearly that continuing the old system was a sure road to the permanent collapse of the system built on the back of an increasingly infirm and insolvent national grid. Their collective action led to the amendment of the 1999 Constitution and the enactment of the Electricity Act, 2023, which effectively put an end to the single national electricity market, guided, regulated, controlled and operated centrally out of Abuja. These legislations brought about a major evolution, and fully enabled the devolution of electricity powers to the States, a power that had been denied them since 1972 when NEPA was created, even though Nigeria is supposedly a federation.
Nigeria’s electricity sector is now in the era of State electricity markets and we who are pretty much the cream, the very best of Nigeria’s electricity sector, many of us here who came into our own in the harsh crucible of executing reforms, we cannot afford to sit back and watch. Why? Because none of us here comes from, or was born in, the Federal Capital Territory. We must never forget that we come from States.
Part II: The Paradox of Akwa Ibom’s Abundance and Scarcity
Let us turn to the facts that will describe Akwa Ibom’s journey. This State has resident in its territory assets that can quickly scale up to process enough natural gas to generate 2,500 MW of power daily, 24 hours a day. We have a thermal generation plant in Ibom Power Company Limited that was Iicensed to be constructed to deliver 685MW but has not grown in 18 years beyond its Phase 1 nameplate capacity of 191MW. Distribution assets in the State operated by PHED cannot deliver much beyond 380 MW, assuming the energy could be received, with assets most of which were historically paid for by Akwa Ibom State but for which the State has received no credit or equity allotments these past 19 years since PHED was established. With per capita consumption of much less than 1kWh and less than 40% of households possessing prepayment meters, it is clear that PHED, despite being nominally owned by the 4 PHED States, forgot its core purpose practically from the time it was privatised.
This is the paradox of Akwa Ibom — abundance of resources, scarcity of supply.
Part III: Akwa Ibom’s Policy and Law — A New Pathway
Akwa Ibom has chosen a new direction. The State Electricity Policy, 2024 sets the vision: universal access, reliable supply, and a diversified mix of energy sources with gas as a transition fuel. The State Electricity Law, 2025 provides the legal backbone: establishing the Akwa Ibom State Electricity Regulatory Commission (AKSERC), the State Electrification Agency and Electrification Fund and devolving regulatory authority from NERC to the AKSERC.
But the reality is that policy texts do not deliver power. Only a relentless focus on execution intensity, credibility and trust do.
Part IV: Strategic Priorities for Akwa Ibom
So, drawing from experience, the State Electricity Policy, the Law the realities on the ground, there are five strategic priorities that must be addressed by any credible State electricity reforms:
1. Operationalise AKSERC: appoint a team of capable, professional, credible commissioners, to develop technical and economic regulations and establish a market design that justifies and enables sustained investment into the State electricity market. Importantly, protecting this entity and ensuring its independence, similar to the way the Enugu State Government has been doing for its regulatory commission lies at the very heart of enabling this new but vital institution to fulfil its role.
2. Focus on bringing making Akwa Ibom’s blessings work by bringing together the elements of the State electricity value chain in a mutually supporting commercial framework that is focused on serving the State first and foremost. This means recover Ibom Power Company and restore it to the promising path on which its started; and put it into a commercial relationship with the State electricity distribution company. Thereafter, structure their collective operations to maximise reach and commercial intensity by bringing in quality management for both companies via a transparent and professionally executed PPP process, improving corporate governance and utilising the benefits of State ownership to develop a long-term, cost-effective project financing programme. This commercial value chain is the bedrock of the establishment and growth of the State Electricity Market.
3. Focus on the Off-Grid Market Too: The proverbial unserved and underserved communities, the so-called rural areas are where the success of the State’s reform programme will be recorded the hearts and minds of the citizenry. In the same professional manner in which the State Regulator will be established, set up the State Electrification Agency. The MoU signed just last week with the REA is a key element in this aspect of the reform programme. Utilise all of Akwa Ibom’s energy resource endowments. Use natural gas wherever it is cost-efficient to do so. Integrate renewables into the State energy mix, using biomass, wind and small hydro alongside natural gas; but do so in a sustainable, economically sensible manner.
4. As items 1 – 3 get done, mobilise investment and investors that are eagerly looking for the kind of opportunities Akwa Ibom has to offer. Structure bankable Public-Private-Partnerships, leverage the pool of funding from Development Finance Institutions that have been looking for opportunities to engage with Nigeria’s infrastructure needs with serious decision makers outside Abuja. Also, attract both diaspora and domestic capital, particularly from Nigeria’s pension funds that were designed just for this purpose and have also long- awaited credible opportunities to invest the over =N=150bn of pension contributions that they collect each month.
5. Perhaps unnoticed but also paramount, invest seriously in building up Human Capital: train regulators and policymakers and be relentless about giving them every opportunity to develop their skills and experience, thus positioning Akwa Ibom as a centre of learning for State reform. Because reforms are executed and sustained by trained technocrats who have integrity and full political backing.
Part V: The Political Economy Challenge
Speaking of politics, Your Excellencies and distinguished audience, over the years, it has become clear to me and, perhaps to my colleagues from the trenches, some of whom are gathered at this auspicious event, that the greatest challenge we face is not technical, but political. Will this State Government, under His Excellency, Pastor Umo Eno, have the courage to allow tariffs that reflect costs while sensibly deploying funding to make capital projects in rural areas cost-effective; will it insist on and firmly protect regulatory independence even when politics pressures us; will build partnerships across government, private sector and DFIs rather than capture reform for patronage? Will it walk the talk? I believe His Excellency has answered these questions simply and directly. Yes, he will, he has said.
Part VI: Lessons for the Federal Government and the States
So, permit me, with genuine humility, to address our leaders directly. To the Federal Government represented here by senior officers from the Executive and Legislative Branches: the Federal Government must now become a partner, not a gatekeeper. Support States like Akwa Ibom and others as they embark on the very hard labour of creating pathways where there were absolutely none before. This means a collaborative and not an aloof and one-sided transition of regulatory responsibility or shouting at States and telling them that they do not know what they are doing. Instead, the Federal Government must recognise and act decisively on the recognition that without a reliable national grid the States will not develop markets with depth. This means that as States are restructuring their intra- State markets, so also must the Federal Government restructure the Transmission Company of Nigeria to make it become like the States driven by commercial intensity. To the States, the templates are being written by States like Enugu, Abia and, of course, Akwa Ibom: electricity reform is now your responsibility. States must buckle up and build institutions, train people, design carefully and never forget that without working hard at gaining credibility, markets fail.
Part VII: Closing: Inspiration and Challenge
Your Excellency, as I close, I want to remind us not to get caught up in a technocratic bubble. We must never forget that electricity reform is not abstract. It is about the child who cannot study at night, the patient whose surgery fails without power, the entrepreneur forced to shut down.
Your Excellency, please never forget that reforms fail when credibility is lost and credibility will always be high and reforms succeed when integrity and execution meet and work with political courage.
Akwa Ibom now has the chance to show Nigeria a new way. Let this Summit mark the moment we turned abundance into supply, potential into prosperity, policy into power.
