LEGAL AND REGULATORY BRIEF
|Country Population||Actual Generation Capacity||Deficit (in MW)||Electricity’s contribution to GDP||Ease of doing Business (Ranking) |
|218,541,212||4,605.72 MW||213,935.5 MW||1.39% (Q2 of 2022)||131st|
ENERGY MIX OVERVIEW
|Fuel Mix: The generation of electricity in Nigeria is dominated by two sources- non-renewable thermal (natural gas) and renewable (hydropower). The primary energy source for Nigeria’s electricity grid is from thermal-based resources – which means that about 74.65% of the power plants in Nigeria are fueled by gas, the remaining 25.35% is sourced from hydro resources. Currently, electricity generated from solar, wind, biomass, and geothermal are not fed into the grid but are diverted to serve predominantly rural areas and underserved/unserved areas with limited access to electricity.|
|Installed and Actual Generation Capacity: Nigeria has an installed generation capacity of 12,522 MW while actual generation capacity stands at 4,605.72 MW as of August 2023|
|Transmission Capacity (Wheeling capacity): The wheeling capacity of the power sector is estimated at 8100MW as of January 2023, equivalent to 9529MVA|
|Electricity Access Rate: 59.5%% of the Nigerian population have access to electricity (as of 2021, based on World Bank data)|
|Electricity Demand (Forecasted and Projected): The National Peak Demand Forecast in Nigeria as of January 2022 is 19,798MW (as of January 2022)|
|Off-grid/Renewable Energy Capacity and Framework: Off-grid electrification in Nigeria is developing rapidly; with the sector focused on the provision of mini-grids, solar home systems and solar photovoltaic systems to serve homes and commercial and industrial (C&I) customers. The Rural Electrification Agency (REA) is tasked with developing the off-grid power market. However, the Nigeria Electricity Regulatory Commission (‘NERC’ or ‘the Commission’) maintains general regulatory oversight of the entire sector. Policies and Regulations exist within the legislative framework of the sector which provide directives regarding renewable energy utilization and off-grid electrification in general. It is also worth noting that the Electricity Act which was enacted in 2023 introduced the federal and state electricity market jurisdictional split which could see the creation of state electricity regulatory bodies who may equally be involved in the development of the off-grid sector.|
|Alternative Off-take Arrangements: The sector allows the participation of competent entities as credible off-takers for electricity sale and purchase, in addition to the Nigeria Bulk Electricity Trading (NBET). Independent Power Producers (IPPs) are permitted to sell power to off-takers. Key off-takers of power include Distribution Companies (DisCos) and Eligible Customers.|
ELECTRICITY SECTOR OVERVIEW AND MODEL
Power Sector Model: The power sector is partially liberalized – On the one hand, the sector majorly operates a single-buyer power market model in which a government-owned institution (the NBET) serves as the sole buyer or credible off-taker of electricity generated from Generation Companies (GenCos) and/or IPPs and serves as the sole vendor of electricity generated to Distribution companies. On the other hand, the sector operates a bilateral power market model, although bilateral trading is at its infancy stage. Under this model, eligible buyers and sellers are permitted to contract directly with off-takers in the electricity market under the auspice of the Eligible Customer Regulation following the release of the policy in 2017 and the subsequent eligibility declaration by the Minister of Power and the ‘Willing buyer, Willing seller’ policy framework which was introduced by the Federal Ministry of Power in 2019. The market model allows wholesale transactions involving the sale and purchase of power to be undertaken by licensed private participants such as Eligible Customers and DisCos.
Utility Type Structure: The value chain of the power sector in Nigeria is modelled and operated by vertically integrated companies. Furthermore, although all six (6) generation companies and eleven (11) distribution companies which were created from the now defunct Power Holding Company of Nigeria (PHCN) have been privatized, the transmission subsector is controlled by the Federal Government through the Transmission Company of Nigeria (TCN).
VALUE CHAIN DYNAMICS/ADMINISTRATION
Structure of the Value Chain: The structure of the Value Chain in the Nigerian power sector is highlighted below:
- Generation: GenCos and IPPs generate electricity and sell to NBET and/or eligible customers.
- Transmission: TCN transmits electricity from the GenCos purchased by NBET for resale to the DisCos/eligible customers and manages the grid network. The Electricity Act, 2023 has now introduced the Independent Electricity Transmission Network and Network Operators License(s) to enable private individuals construct and own independent electricity transmission networks.
- System Operator: Although this value chain activity is currently being undertaken by the Transmission Company of Nigeria, the Electricity Act, 2023 envisages the segmentation of this activity to be undertaken by an Independent System Operator (ISO), at such a time as NERC shall determine.
- Bulk Trader: NBET as the licensed bulk trader engages in the purchase of electricity (from IPPs, National Independent Power Projects and GenCos) and subsequent resale to DisCos and eligible customers. NBET typically executes a Power Purchase Agreement (PPA) with the GenCos and a Vesting Contract with the DisCos.
- Distribution: DisCos receive electric power allocated to their network (based on an energy allocation percentage per DisCo) for onward supply to end-users and/or eligible customers. The DisCos are also the collection agents for the entire value chain. The Electricity Act, 2023 has now introduced the Independent Electricity Distribution Network and Network Operators to enable private individuals other than successor Distribution Companies to construct, own and operate Independent Distribution Networks.
Electricity Market Dynamics
Institutional and Market Structures
The Nigerian Electricity Supply Industry (NESI) consists of the following key institutions, participants and stakeholders – the Federal Ministry of Power (FMOP), the Nigerian Electricity Regulatory Commission NERC), NBET, the six generation companies, IPPs, TCN- comprising of the System Operator (SO) and the Market Operator (MO and the Transmission Service Provider (TSP)), the eleven distribution companies and eligible customers operating in the sector. The Commission has the responsibility of regulating and supervising the activities undertaken by all participants in the electricity sector, in line with the Electricity Act 2023 and the secondary legislations applicable within the sector’s statutory framework.
In terms of the market staging, the Nigerian electricity sector is currently at the Transitional Electricity market stage (TEM); which is a pre-cursor to wholesale competition and full liberalization of the sector.
By virtue of the Electricity Act, 2023 and Nigeria’s 2023 Constitutional amendment providing for Federal and State electricity market jurisdictional split, future changes to the institutional market structure can be expected.
Key Stakeholders and Regulatory Agencies
Below are the key stakeholders and agencies in the Nigerian electricity sector:
Federal Ministry of Power (FMOP)
The FMOP is tasked with providing policy guidance for the attainment of adequate and reliable power supply in Nigeria. It also has the main function of ensuring and maintaining a well-coordinated power sector through agencies under its supervision. The Ministry is guided by the National Electric Power Policy of 2001, the Electric Power Sector Reform Act of 2005, the Roadmap for Power Sector Reform of 2010, the Rural Electrification Implementation Strategy Plan 2016, and general investment guidelines.
Nigerian Electricity Regulatory Commission (NERC)
NERC is an independent body established pursuant to the Act. The Commission serves as the primary regulator for the power sector and has the main responsibility of licensing and regulating market participants while protecting the interests of consumers. In addition, the Commission is tasked with establishing and approving adequate operating Codes, ensuring security and reliability, promoting safety and quality standards, developing tariff methodologies, reviewing electricity tariffs and promoting competition and private sector participation in the market where feasible. The values of the Commission revolve around transparency, fairness and accountability.
Nigeria Bulk Electricity Trading (NBET)
NBET was established in 2010 as a government owned body to serve as a credible off-taker in the electricity market. The NBET as an electricity trading licensee purchases power from GenCos and IPPs through Power Purchase Agreements (PPAs) and in turn sells power to DisCos through Vesting Contracts.
Rural Electrification Agency (REA)
The REA is responsible for promoting, supporting and providing electricity access to rural areas in Nigeria. To this end, the REA was set up to administer the Rural Electrification Fund (REF) which is a designated fund created by the Act to promote, support and provide rural electrification programmes. In pursuit of its mandate and responsibility, the REA has undertaken certain programs and initiatives such as the Energizing Education Programme (EEP), Nigeria Electrification Project (NEP) which aids in the provision of solar home systems and mini grids to rural communities, the Energizing Economies Initiative (EEI) to aid small and medium enterprises, etc.
Energy Commission of Nigeria (ECN)
The ECN was established through the enabling Act No. 62 of 1979 (as amended by Act No. 32 of 1988 and Act No. 19 of 1989) and is tasked with the strategic planning and coordination of national energy policies. The objective of the body is the coordination and surveillance of the development of the various energy resources used in the provision of reliable and adequate energy supply for all Nigerians and the sustenance of the nation’s economic development. The commission undertakes research concerning national policies on energy utilization, advises the Federal government on matters related to the energy sector, prepares strategic and periodic masterplans for agencies of the government on energy use, promotes the development of manpower in the field of energy, and undertakes other activities as may be directed by the government.
Nigerian Electricity Management Services Authority (NEMSA)
NEMSA was established in 2015 to supervise the conformity of equipment and facilities utilized in electricity supply to the average technical standards contained in the different Codes applicable to stakeholders in the sector. NEMSA thus engages in the enforcement of technical standards and Regulations, the certification of electrical installation contractors, and the inspection of networks, systems, meters, etc.
Nigeria Electricity Liability Management Company (NELMCO)
NELMCO was established based on the Act as a liability-handling institution and as part of the electricity sector reform. Following the unbundling of the PHCN in 2013, the NELMCO took over the liabilities of the PHCN. These liabilities include majorly debts and non-core assets.
Presidential Taskforce on Power (PTFP)
PTFP was established in June 2010 to work with the key agencies in the power sector towards the achievement of the reform of the power sector, and the promotion of private investments into the sector. The PTFP majorly plays a supervisory role, working with other agencies towards examining and monitoring the execution of development projects in line with the targets of the Power Sector Reform Roadmap of 2010.
National Power Training Institute of Nigeria (NAPTIN)
NAPTIN was created in March 2009 with the responsibility of undertaking human resource development and workforce capacity building for personnel in the electricity industry. NAPTIN provides training to both public and private agencies in the sector on skills needed for the vibrant growth of the sector’s output in electricity supply such as safety, project management, information technology, marketing, etc.
Gas Aggregation Company Nigeria Limited (GACN)
GACN was created in 2010, pursuant to the National Domestic Gas Supply and Pricing Regulations of 2018. The company was created for the purpose of ensuring the adequate supply of natural gas resources to strategic sectors within the Nigerian industrialization premise, the power sector majorly.
Operator of the Nigerian Electricity Market (ONEM)
ONEM is licensed to operate and undertake the Market Operator (MO) functions as the administrator of the wholesale electricity market in the electricity supply industry. It is responsible for the operation of the electricity market and settlement arrangements and supervises the conformity of such transactions with the Market Rules. It is a semi-autonomous body under the TCN.
Nigeria Electricity System Operator (NESO)
NESO has the responsibility of managing the electricity grid and establishing the reliability and security of the grid through system operation services. It is a semi-autonomous body under the TCN.
National Hydroelectric Power Producing Areas Development Commission:
Section 82 of the Electricity Act (2023) establishes the National Hydroelectric Power Producing Areas Development Commission (N-HYPPADEC) which shall be responsible for formulating policies and guidelines for the development of hydroelectric power producing areas, without prejudice to the powers of the Minister to issue policy directives and the NERC’s power to regulate the NESI. Section 89 of the Act outlines the other functions of the N-HYPPADEC.
LEGAL, POLICY, REGULATORY AND CONTRACTUAL FRAMEWORK
Laws, Policies and Regulations: The electricity sector is majorly governed and guided by the following laws, policies, and regulations, classified into policies, primary and secondary legislation.
The National Energy Policy, 2003: The National Energy Policy developed by the ECN establishes the framework required for development of the energy sector for effective contribution of the sector to the national economy. The policy also primarily takes into consideration, the effect of fossil fuel on environmental degradation and thus, emphasizes the utilization of renewable energy resources. It looks towards the attainment of a sustainable energy future for Nigeria, with the overall objective of achieving a clean energy-based sector. The Policy alongside related policies do not have the force of law and only serve as a framework for the development and implementation of the primary legislation in the sector.
National Renewable Energy and Energy Efficiency Policy (NREEEP), 2015: The NREEEP was approved by the Federal Executive Council in 2015 as a framework for action to address the challenges faced by Nigerians regarding inclusive access to modern and clean energy resources, improved energy security and climate objectives. The policy recognizes the national significance of renewable energy generated electricity and thus provides for the development, operation, maintenance, and upgrading of new and existing renewable energy electricity generation activities. The policy also serves to guide the power sector on renewable energy utilization and supply, pricing, efficiency and conservation, research, and development, etc.
The Constitution of the Federal Republic of Nigeria, 1999: The Constitution vests the National Assembly and State Houses of Assembly with the power to legislate and enact laws regarding electricity supply in paragraphs 13 and 14 of the Concurrent Legislative List, respectively. The Constitution was amended in March 2023 to amongst other amendments, vest the National Assembly and States Houses of Assembly with the authority to legislate and enact laws regarding electricity value chain activities in areas covered by the national grid, thus lifting the previous limits of states to areas not covered by the national grid.
The Electricity Act 2023: The Act repeals the Electric Power Sector Reform Act 2005 and enact the Electricity Act (EA) 2023, to consolidate the laws relating to the Nigeria electricity supply industry, provide a comprehensive legal and institutional framework for the power sector in Nigeria in the areas of electricity generation, transmission system operation, distribution, supply, trading , enforcement of consumer rights and obligations, provide for the holistic integrated resource plan and policy that recognizes all sources for the generation, transmission, and distribution of electricity, including the integration of renewable energy to Nigeria’s energy mix , and attract investments. Please refer to EL’s guide on the Electricity Act.
NERC Permit for Captive Power Generation Regulations, 2008: The Regulation was established to regulate the generation of electricity for self-generation and consumption. The Regulation stipulates the permitting process and requirements and makes provision for the sale of surplus power to off-takers by captive power generators based on terms detailed in the Regulation.
The Market Rules, 2009: The Market Rules framed by the MO establishes the electricity trading system for the Nigerian Electricity Supply Industry (NESI) and stipulates the requirements within the various market stages for the market to effectively transition to a wholesale electricity market. The Rules provide the framework for an efficient and profitable wholesale electricity market. The Rules also detail the role of participants within the electricity market regarding market participation, contracting, scheduling and dispatch, market settlement, etc. in line with the governance, administration and enforcement provisions as enshrined in the Rules.
NERC Licence and Operating Fees Regulation, 2010: The Regulation for Licence and Operating Fees, 2010 was promulgated to repeal the Regulations for Licence and Operating Fees, 2006. The Regulation spells out the procedure to obtain licences to participate in the generation, transmission or distribution subsectors, and the criteria for the renewal, suspension, cancellation and withdrawal of licences.
Independent Electricity Distribution Networks (IEDN) Regulations, 2012: The IEDN Regulation was established by the Commission to provide standard rules for issuance of distribution licences to qualified operators and licensees seeking to engage in electricity distribution, independent of the existing distribution network operated by the DisCos.
Embedded Generation Regulations, 2012: The Regulation was established by the Commission to provide standard rules for Embedded Generation and distribution of electricity to ensure safe, secure and efficient electricity supply. The Regulation also provides the framework for the issuance of licences to investors looking to participate in the sector as embedded generators.
Metering Code, 2013: The Code stipulates the requirements for the metering of the Connection Points of Participants on the Transmission or Distribution Network and caters to the Commercial Metering System. In addition, the Code also spells out the technical and operational criteria and the procedures to be complied with by the DisCos in implementing their obligations to provide metering services to customers of the Distribution System.
Regulations on National Content Development for the Power Sector, 2014: The Regulation was established to promote the utilization of Nigerian human and material resources, goods, works, and services in the industry; the opening of the Nigerian Electricity Supply Industry to Nigerian people and expertise; the building of capabilities in Nigeria to support increased investment in the electricity industry, and the leveraging of existing and future investment in the NESI to stimulate the growth of Nigerian enterprises.
NERC Regulation for the Procurement of Generation Capacity, 2014: The Regulation provides for the establishment of a systematic, transparent and competitive process that provides reasonable assurance to Buyers in procuring additional electricity generation capacity in NESI at least cost to consumers. The Regulation also focuses on the maximization of private involvement in the provision of generation capacity to a Buyer, by ensuring that firms contracted to provide new capacity have the necessary technical expertise, financial resources, and industry experience to carry out such projects successfully.
Health and Safety Code, 2014: The Code established by NERC dictates provisions for the safeguarding of persons from hazards arising from the installation, operation or maintenance of conductors and equipment in electric supply stations, overhead or underground electric supply and communication lines. The Code also includes workplace rules for the maintenance of electricity supply infrastructure or equipment operated by utilities and under the control of qualified persons.
NERC Investment in Electricity Networks Regulation, 2015: The Regulation was promulgated by the Commission and provides the procedure for investing in electricity networks in Nigeria. The Regulation seeks to create strong incentives to encourage the TCN and the DISCOs to make appropriate and sustainable investments in capacity expansion.
Regulations for Mini-Grids, 2016: The Regulation was promulgated in 2016 by the Commission to accelerate electrification in areas without any existing distribution grid, i.e., unserved areas and areas with an existing but poorly electrified or non-functional distribution grid, i.e., underserved areas. The Regulation seeks to promote private sector engagement with communities and other stakeholders for the attainment of nationwide electrification while minimizing risks associated with mini-grid investments.
Eligible Customers Regulation, 2017: The Regulation came to fore following the declaration of eligible customer participation in the power sector by the Minister of Power in 2017. The Regulation aims to facilitate competition in the supply of electricity, promote the rapid expansion of generation capacity and facilitate improvement in quality of supply. The Regulation encourages third party access to transmission and distribution infrastructure necessary for full retail competition in the power market and provides guidelines towards the attainment of stability and operational efficiency of generation companies with the aim of achieving reduced technical losses.
Meter Asset Provider Regulations, 2018: The Regulation currently under review, was established by the Commission following the agitation by electricity customers to be metered to pay for actual power consumed and to combat the practice of estimated billing by the DisCos. The Regulation also notably forms one of the initiatives undertaken by the Federal Government to regulate metering by DisCos; the other initiative being the National Mass Metering Programme (NMMP) which was declared in August 2020 to promote speedy and efficient deployment of meters across the country aimed at closing the metering gap in NESI.
Grid Code – Version 03, 2018: The Grid Code spells out the day-to-day operating procedures and principles governing the development, maintenance and operation of an effective, well-coordinated and economic Transmission system for the electricity sector in Nigeria.
Distribution Code, 2018: The Code is designed to facilitate the efficient usage of electricity for all users of the Distribution Networks and facilitate competition in the generation and supply of electricity without any form of undue discrimination between users and classes of users.
Customer Protection Regulations 2023: The Consumer Protection Regulations seek to safeguard consumers from the activities of electricity distribution companies (DisCos) in Nigeria. These regulations consolidate existing consumer protection measures, reinforce frameworks for consumer protection, promote access to electricity, align service standards with international best practices, and establish minimum standards for service delivery.
Guidelines for Secondary Escrow Account Management for Bilateral Transactions by Electricity Distribution Licensees (the Guidelines), 2023: NERC issued the Guidelines for Secondary Escrow Account Management for Bilateral Transactions by Electricity Distribution Licensees (the Guidelines). The Guidelines aim to provide an arrangement by which DisCos may directly enter bilateral transactions with trading partners and specially dedicated Secondary DisCo Account Escrow Arrangements (SDAs) set up to administer the funds received by DisCos from the market with respect to these transactions.
Incentives and Fiscal Policies
There is no specific fiscal policy guiding participants in the Nigerian Electricity Supply Industry on taxation and business incentives; however, there are legislative provisions which govern the payment of taxes within the sector which include:
|Section 10 of the Industrial Development (Income Tax Relief) Act, No 22 of 1971||It contains a Pioneer Status Incentive (PSI) which is a tax holiday dictating the non-payment of corporate income tax for three (3) to five (5) years by companies that manufacture amongst others, electrical related equipment, which are considered pioneer products.
|Section 39 of the Companies Income Tax Act, 1977||This provides incentives for companies engaged in gas utilization which includes an initial tax free period of three (3) years which may be renewed for two (2)years if the business is successful, or an investment allowance of 35% as an alternative, 10% retention of capital allowances following the tax-free period for investment into the machinery of the company, an additional investment allowance of 15%, tax free dividends during the tax free period where the investment for the business is in foreign currency or where the introduction of imported plant and machinery during the period is not less than 30% of the equity share capital of the company. The Act also provides for the tax deductibility on interests payable on any loan obtained with the prior approval of the Minister of Finance for a gas project.|
|Section 5 of the Customs, Excise Tariff, etc. (Consolidation) Act of 1995||It provides for the exemption of machinery imported for power generation using natural gas resources, from custom duties set out in the First Schedule to the Act.|
|Section 14 of the Finance Act of 2019||This amends Section 33 of the Companies Income Tax Act (CITA) to provide for the payment of ‘Minimum tax’ by companies during the years they do not declare taxable profit.|
|The Value Added Tax (Modification Order) of 2020||It provides a fiscal incentive for investors and participants in the sector by exempting gas supplies to generation companies and renewable energy equipment from VAT.|
The contractual structures applicable in the Nigerian electricity sector as defined in the Performance Agreements, underpinning the privatisation of the sector are detailed below as Industry and Transaction Documents:
- Industry Documents
- Grid Connection Agreements: These are agreements entered into between a company and the Transmission Company of Nigeria regarding the terms and conditions of the former’s connection to the TCN’s Transmission Network System.
- Vesting Contracts: These are contracts relating to the purchase of electricity by a distribution company in the Federal Republic of Nigeria. These contracts are entered by a distribution company and the bulk trader (NBET).
- Generation Licence: A generation licence authorizes a licensee or company to construct, operate and maintain a generation station for purposes of generation and supply of electricity. Such licenses are issued in accordance with the Electricity Act, 2023 and allows its holder to sell power or ancillary services to any of the classes of persons specified in the licence.
- Distribution Licence: This is the distribution licence issued to a company in line with provisions in the EA. Such licence primarily authorizes its holder to construct, operate and maintain a distribution system and facilities, for the purpose of actualizing the following – the connection of customers for the purpose of receiving supply of electricity; the installation, maintenance and reading of meters, billing and collection; and such other distribution service as may be prescribed for the purposes of the distribution licence.
- Use of Transmission Network System Agreements (TUoS): These agreements govern the right of a distribution company or related entity to use of the transmission network system under the control of the TCN for the purpose of conveying electricity through the transmission network to end-users.
- Transaction Documents
- Shareholders Agreements: These agreements govern shareholder interests in a company and formed the basis of the sale and purchase of the successor companies during the Nigerian power sector privatization process as executed between the Bureau of Public Enterprises (BPE), Ministry of Finance, the Purchaser (investor) and the Company (the successor company). The Agreement formed part of the appendices to the Share Sale Agreement. Other accompanying documents include the Performance Agreement, Liability Transfer and Deed of Assignment.
- Technical Services Agreements: These are agreements entered into between the Purchaser of a Company (investor) and a Technical Service Provider for the provision of technical related services as it pertains to the purchaser’s business objective for electricity generation and supply in NESI.
- Other Commercial Agreements
- Power Purchase Agreement: These are agreements governing the sale and purchase of electricity between a buyer (off-taker) and a seller. Such agreements are entered into between generation companies or private power producers and NBET or eligible customers and other off-takers.
- Distribution Use of System Agreements (DUoS): This agreement governs the right of a party to use the distribution network system under the control and operation by the DisCos, for the purpose of supplying electricity to end-users and/or eligible customers.
- Gas Sale and Supply Agreements: These are natural gas supply contracts between generation companies and natural gas suppliers. Recently in April 2020, the Federal Government notably approved the payment of N200 billion to the Nigerian National Petroleum Corporation (NNPC) for the purpose of supplying gas to power generation companies who may not have signed gas supply agreements to boost power production despite the Covid-19 Pandemic.
- Bilateral Contracts: These are contracts between two parties, with or without the interference of a regulatory agency. The ‘Willing buyer, Willing seller’ policy of the power sector allows for contracts between purchasers such as eligible customers and the various supplier categories. Although this contractual arrangement is not currently operational between Generation and Distribution Companies, NERC has recently signaled the initiation of Partial Bilateral Contracting in the NESI. This contractual framework will involve the execution of direct Power Purchase Agreements (PPA) between Distribution Companies (DisCos) and Power Producers. Whereas the current structure for the bulk purchase of electricity was based on a PPA arrangements between Nigerian Bulk Electricity Trading Company (NBET) and Generation Companies and a subsequent contractual arrangement (Vesting Contracts) between NBET and DisCos. The new bilateral contractual framework will enable DisCos to freely negotiate applicable tariffs and terms for the bulk purchase of electricity from GenCos and IPPs. However, it should be noted that this contractual arrangement is being implemented in phases and only three DisCos are thus far expected to take advantage of this contract structure
Licensing and Permit Process: To participate in generation, transmission and distribution of electricity in the NESI; applications for Licences must be in accordance with the provisions of Section 63 of the EA and Chapter II of the Regulations for the Application for Licence (Generation, Transmission, System Operations, Distribution & Trading) 2010.
The legislative framework of the power sector makes provisions regarding applications for Permits regarding captive power generation. Such applications must be made in accordance with Chapter II of the Regulations for the Granting of Permits for Captive Power Generation, 2008. Sections 7 & 10 of the Mini-Grid Regulation of 2016 also provides the procedure for applications regarding permits which would allow a private entity to manage and operate a mini-grid in a specified area.
Land Acquisition and Ownership Rights: Section 118 of the EA sets out the principles regarding land acquisition and ownership rights. The legislative provision mainly dictates that licensees who require land in connections with their obligations can apply to the Commission to prescribe such land as being required for public purposes (generation, transmission or distribution).
Pricing: Tariffs are determined by NERC, based on Section 116 of the EA which spells out activities which are subject to tariff regulation and otherwise, and elements which must be taken into consideration in the formulation of tariff methodologies which form the basis for the determination of tariff rates. Currently, the power sector utilizes the Service Reflective Tariff (SRT) methodology in the determination of tariff rates; this is a methodology that focuses on pricing consumers based on the level and quality of electricity supply received over a period, depending on the applicable customer categorization band.
Tariffs: The SRT regime looks towards the attainment of a transparent, participatory, and cost-reflective tariff for the Nigerian power sector. NERC, in 2021 reviewed the tariffs of the DisCos in consideration of each DisCo’s CAPEX proposal over a 5-year plan in line with approved Performance Improvement Plans.
The SRT rates published by the Commission in its Multi Year Tariff Order (MYTO)–2021 Extraordinary Tariff Order which took effect from 1st July 2021 for all 11 Electricity Distribution Companies (DisCos) include the classification of customers into the following service bands:
|Service Bands||Classes of Customers||Supply period|
|Service Band A||Non-maximum demand/Non-MD (Residential – single and three phases)||Electricity supply for a minimum of 20 hours|
|MD1 (Schools/Churches/Street lights)|
|Service Band B||Non-maximum demand/Non-MD (Residential – single and three phases)||Electricity supply for more than 16 hours but not more than 20 hours|
|MD1 (Schools/Churches/Street lights)|
|Service Band C||Non-maximum demand/Non-MD (Residential – single and three phases)||Electricity supply for more than 12 hours but not more than 16 hours|
|MD1 (Schools/Churches/Street lights)|
|Service Band D||Non-maximum demand/Non-MD (Residential – single and three phases)||Electricity supply for more than 8 hours but not more than 12 hours|
|MD1 (Schools/Churches/Street lights)|
|Service Band E||Non-maximum demand/Non-MD (Residential – single and three phases)||Electricity supply for more than 4 hours but not more than 8 hours|
|MD1 (Schools/Churches/Street lights)|
|Lifeline Tariff||R1||Customers who use not more than 50 kWh per month|
The expectation of the SRT regime over time includes the incentivization of payment compliance from a satisfied customer base, the reduction and eventual elimination of the perennial issue of estimated billing. The outcome is also expected to foster network investments by the DisCos for increased energy access across the Country.
The tariff rates per kWh operational in the Nigerian power sector can be found at www.nerc.gov.ng .The SRT also provides a Lifeline tariff for underprivileged consumers (R1 class). The tariff rate for such consumers is N4.00 per kWh and it is a uniform rate charged by all distribution companies.
Investment Benchmarks: The basis of private sector investment in the on-grid segment of the Nigerian power sector is premised on Metering, Aggregate Technical, Commercial ad Collection (ATC&C) loss reduction and other capital investments such as network capacity enhancement, information management, etc.
Financing Framework: Development projects in the Nigerian power sector are often financed through public-private partnerships, which involve co-venturing developers from the public and private sectors agreeing to pool their resources and share the risks associated with the development of a project. Other sources for funding include equity capital, short term commercial loans, subordinated debt/mezzanine capital, amongst others.
It is noteworthy that domestic funding through local commercial banks is readily available for small scale off-grid projects unlike on-grid projects which are naturally large-scale; because these local banks are limited in their ability to fund such large-scale projects because of limited balance sheet sizes and a preference for short term commercial loans.
Regarding on-grid electrification projects, international donors, lenders, and fund programmes such as the Emerging Africa Infrastructure Fund, Africa Finance Corporation, World Bank. International Finance Corporation and the African Development Bank play a huge part in the financing framework due to the large-scale project(s) costs; however, funding from such international institutions occurs only after a thorough bankability assessment. In the Nigerian power sector, it is important that power projects possess credit enhancement facilities such as standby letters of credit, risk insurance, indemnity, and debt mobilization agreements, etc, to augment bankability.
The Power Sector Recovery program approved in June 2020 between Nigeria and the World Bank also comes to bear in project financing. The Programme seeks to advance an International Development Association credit of $750 million towards the increase of annual electricity supply to the distribution grid from 2022, increase in public awareness about power sector reforms and performance amongst women, and decline in annual tariff shortfalls.
From the perspective of legislation, there is no specific Regulation governing project financing or development in the Nigerian power sector. However, general laws of contract, laws governing corporate entities such as the Companies and Allied Matters (CAMA) Act of 1990, and insolvency laws come to play in transactions involving project development.
Additionally, in September of 2022, Nigeria published an Integrated Financing Framework (INFF) to map out a sustainable financing plan for Nigeria to deliver on Nigeria’s Sustainable Development Commitments.
Sterling Bank in 2017 developed a Sustainability Investment Strategy targeted at impacting businesses within socially and environmentally conscious sectors which is well-aligned with the United Nations Sustainable Development Goals.
One of the beneficiary sectors is the Renewable Energy Sector. Sterling Bank’s approach includes trading through the creation of a platform that enables the sale of renewable energy solutions between electricity generators, distributors, and users; financing large projects that provide electricity to communities and businesses and creation of partnerships to encourage the flow of foreign investments into the renewable space and bridging the service gaps that currently exist with the solutions.
In a demonstration of commitment to sustainability, First City Monument Bank (FCMB) scaled up its clean energy financing in 2021. FCMB has adopted a three-prong approach, namely capacity building, providing access to funding and providing opportunity to connect renewable energy developers with end-users. FCMB’s financing framework covers finance of energy efficiency projects, mini-grid renewable energy projects, off-grid (commercial and industrial) solutions and solar stand-alone solutions.
All On provides debt and equity matched to the needs of energy enterprises at varying size ranges. The focus is on enterprises with proven off-grid energy technology solutions and businesses that are ready to scale. In 2021 All-On launched a global aggregated procurement program termed as the DART Program for renewable energy companies, supported by a $10 million Financing Facility, in Nigeria in collaboration with Global Energy Alliance for People and Planet (The Alliance), Odyssey Energy Solutions, and Global Energy Alliance for People and Planet (The Alliance).
InfraCredit’s Climate Finance Blending Facility (the “Facility”)- A catalytic first loss multi-donor facility seeded with £10 million concessional funding by the UK Foreign, Commonwealth & Development Office in 2019/2020 (“FCDO”) to mobilise additional funding from development partners to co-finance off-grid clean energy investments alongside InfraCredit’s local currency guarantees in Nigeria.
PROJECTS AND TENDERS
Projects and tenders in the Nigerian power sector are majorly supervised by the Federal Ministry of Power. The Ministry of Power publishes projects up for implementation, inviting indications of interests and tenders regarding any of the stated projects. In other cases, agencies such as the NBET, the REA, and petroleum agencies such as the Nigerian National Petroleum Corporation (NNPC) can invite expressions of interest to any projects, depending on the project requirements and dynamics. The approval of awarded contracts to organizations which had tendered their interests in the actualization of the concerned project beforehand, could also be done by regulatory agencies in the power sector such as the NERC, and government entities such as Federal Executive Council, Nigeria, etc.
The process of procurement in the Nigerian power sector is conducted by open competitive bidding, as provided for in Section 24(1) of the Public Procurement Act of 2007. The Act also provides for the necessary examination of bids by the procuring entity.
NBET notably has its process for competitive procurement which involves:
|Expressions of Interest (EOI)||The NBET will publish invitations for Expressions of Interest (EOI) in the Federal Government Tenders Journal, the World Bank procurement website and at least two national Newspapers;|
|Request for Proposal (RFP)||The NBET will subsequently review the bids submitted as EOI and then issue a Request for Proposal (RFP) containing technical and commercial aspects of the project to shortlisted bidders following approval by the Nigerian Electricity Regulatory Commission (NERC);|
|Power Purchase Agreement (PPA)||Following the review of bids submitted as proposals, the NBET will issue a PPA to the preferred bidder for the purpose of negotiation;|
|Environment Impact Assessment (EIA) Report||The execution of the Power Purchase Agreement will subsequently occur following the review and approval of an Environmental Impact Assessment Report undertaken by the Federal Ministry of Environment regarding the location for the project.|
An example of a successful project realized in the power sector through this procurement process is the Azura-Edo Independent Power Plant which was commissioned in March 2018. The plant, which is Nigeria’s first project financed Independent Power Project, holds a Power Purchase Agreement with the NBET for a total capacity of 450MW gas-generated power. The NBET supervised the actualization of this project. In the process of this project being executed, debt financing of $900 million had to be provided by a consortium of 15 banks across nine different countries including credit support from the World Bank (Partial risk guareantee) and political risk insurance from the Multilateral Investment Guarantee Agency (MIGA).
Other state power projects have been procured through public private partnerships as was made known by the Minister of Power regarding the construction of various solar power plants supplying electricity to 40,000 people in rural or off-grid areas in 2020.
RECENT COMPLETED PROJECTS
- Nigeria started operating the new Zungeru Hydro Electric Power Project constructed in Niger State by the federal government at $1.2 billion with capacity to generate 700 megawatts of electricity in 2023. The hydropower project was built by a Chinese consortium comprising China National Electric Engineering Company (CNEEC) and Sinohydro.
- Transcorp, a Nigerian conglomerate, also commissioned a 240 MW gas-fired plant in Afam, Rivers State (Niger delta region) in 2023. The project, named Afam Three Fast Power, was developed in collaboration with General Electric and the Federal Government of Nigeria. With an already existing power plant in Afam, this brought the cumulative generating capacity of the plant to 966 MW.
- In March 2023, President Muhammadu Buhari inaugurated the Kashimbila Multipurpose Dam, 40MW Hydropower Station, and Associated 132KV Switchyard, Transmission Line, and Distribution Substation Phase I Project, located at the Kashimbila Dam site in Taraba State.
- In August 2023, President Bola Ahmed Tinubu flagged off the Nigerian National Petroleum Corporation Limited’s 350 megawatts Gwagwalada Integrated Power Plant Project to boost electricity supply. The project would help increase Nigeria’s generation capacity beyond 12,000MW. The project would sit on an already acquired 54.7hectares of land in Gwagwalada, Abuja, and is one of the critical power generation projects along the Ajaokuta-Kaduna-Kano (AKK) gas pipeline corridor, which is at 70% completion.
Investment Laws and Foreign Participation: Two key pieces of legislation which serve as investment laws for the Nigerian power sector are the Nigerian Investment Promotion Commission Act of 2004 and the Foreign Exchange (Monitoring and Miscellaneous) Provisions Act of 1995.
- Nigerian Investment Promotion Commission (NIPC) Act of 2004: The NIPC Act was promulgated with the aim of assuring both indigenous and foreign investors of their right to participate in any enterprise within the sector, except for those on the ‘Negative List’ which indigenous investors are also restricted from. The Act provides that no enterprise invested into by a foreign body will be nationalized or expropriated by the government, thus assuring foreign investors of the absence of undue interference by the government in the former’s activities. The Act also promotes foreign participation by stating that foreign investors are guaranteed the unconditional transferability of funds through a licensed bank in freely convertible currency of dividends or profits, payments in respect of loan servicing, and proceeds emanating from the investment. This entitlement is however subject to the payment of taxes to the government.
- Foreign Exchange (Monitoring and Miscellaneous) Provisions Act of 1995: The FEP Act was established towards the provision of an autonomous and well-regulated foreign exchange market in Nigeria. Section 15(4) of the Act also guarantees the unconditional transferability of funds upon the importation of foreign currency into Nigeria for the purpose of investment in any enterprise.
- The Government of Nigeria’s unification of all exchange rate windows in June 2023 has created a favourable environment for foreign investment in the power sector, as it creates certainty in relation to the applicable exchange rate via the unification policy. This will potentially affect the cost of operating power plants (or back up plants) that rely on Diesel, because Diesel is imported, and a higher Naira value is now required to obtain dollar equivalent, coupled with the daily changes in the exchange rates. Furthermore, the Federal Government eliminated the long-standing petrol subsidy which has also impacted the utilization of petrol-powered generation for electricity generation and has since created an incentive for investments in stand-alone renewable energy generation.
Local Content: The Nigerian power sector has its domestic premise governing the involvement of indigenous participation in the sector detailed in the NERC Regulations on National Content Development for the Power Sector, 2014. The framework promotes the development of Nigerian content in the power sector in various ways including:
The Schedule to the Regulations – Minimum Specification of Nigerian Content provides the quantitative goals of the sector regarding the involvement of local participation with the sector.
Currently, there is a ‘Nigerian Content and Development Enforcement’ Bill before the National Assembly. This Bill, when enacted, will repeal the Nigerian Oil and Gas Industry Content Development Act of 2010 and provide guidelines promoting the development of local content beyond the energy sector alone. The Bill brings various innovations to fore regarding local content development, some of which include: the creation of an Enforcement Board and Governing Councils for each the sectors which the Bill makes provisions for, one of which is the power sector; the Governing Councils will work in cohort with Ministers of the featured sectors for the purpose of enforcing the provisions of the Bill. The Bill also makes it unlawful for visas to be issued to foreigners seeking work in Nigeria when there are qualified indigenes who can perform the required activity; provides for the creation of a Nigerian Content Development and Enforcement on Power Agency for the power sector; and provides that the issuance of licences or permit be exclusive to indigenous companies that demonstrate capacity to execute work in the power sector, etc.
Challenges and Opportunities in the Electricity Sector
|Infrastructural degradation in generation, transmission, and distribution subsectors||Infrastructural Upgrade||Investors can pool resources for the upgrade of infrastructure such as power plants, transmission lines and substations to promote electricity supply to end users.|
|Insufficient investments into the sector’s growth because of insufficient incentives||Fiscal Incentives for investors||Investors are encouraged to take advantage of the various tax incentives currently applicable in the sector, in furthering the actualization of their investments. These incentives include tax holidays under the Pioneer Status Incentive, tax free period for companies involved in gas utilization, exemption from custom duties and VAT for equipment utilizing natural gas and renewable energy respectively, etc.|
|Low rural electrification||Off-Grid Electrification||Investors are encouraged to pool resources towards the provision of solar home systems, solar photovoltaic systems, and mini-grids in rural communities.|
|Absence of diversity in generation mix||Solar Power Generation||Nigeria has an enormous solar power potential of 427,000 MW which remains relatively untapped from an optimal standpoint. Investors are encouraged to make solar power generation a focal point for investments. The construction of small scale mini-grids using solar photovoltaic systems will go a long way in increasing rural electrification in Nigeria, whilst providing revenue for the operator.|
|Poor revenue collection by distribution companies||Cost Reflective Tariffs and Smart metering||The power sector currently has a large-scale opportunity at consolidating cost reflective tariffs for the sector by 2021 through the current Service Reflective Tariff regime. Stakeholders in the power sector must undertake constant review of these tariff rates, with the aim of finding a balance between ensuring adequate returns for suppliers of electricity and the payment of reasonable costs by consumers. A balanced approach would generate profits for the sector.
Also, in line with the National Mass Metering Programme, smart meters must be developed by local manufacturers and deployed swiftly by distribution companies to consumers. The use of smart meters will help utilities attain efficient energy accounting for adequate revenue collection.
|Low creditworthiness in development projects||Credit Support||Project developers can take advantage of opportunities involving the provision of credit support for projects by international organizations such as the World Bank Group partial risk guarantees, and Multilateral Investment Guarantee Agency termination guarantees. The NBET also serves as a credit support agency for the Nigerian power sector.
Gaining credit support gives creditworthiness to project developers, helps in the acquisition of loan, delineates country risks and helps investors make better decisions.
|Insufficient Gas Supply||Reformation of the Gas to Power market||Appropriate gas pricing structures need to be put in place to encourage gas to power investments.
Both public and private agencies must work towards the repair of gas pipelines, and the implementation of strict enforcement mechanisms, for the purpose of preventing gas vandalization.
|Nigeria’s new Foreign Exchange Policy
|Local manufacturing of renewable energy equipment||A significant number of Renewable energy companies purchase their equipment from Original Equipment Manufacturers (OEMs) outside the shores of Nigeria. These OEMs are meant to be paid in foreign currency, while the Renewable energy companies earn all their revenue in Naira and so would have to source for foreign currency to settle their obligations to the OEMs. The increase in the Naira value required to obtain Dollars because of the new exchange policy and the daily fluctuations in the Dollar exchange rate creates financial challenges for the procurement of renewable energy equipment and constant fluctuations to the cost of in-country equipment procurement. Furthermore, the elimination of petrol subsidy also impacts the cost of transporting the goods in-country which also creates the challenge of high procurement costs. This challenge may hamper the rate of adoption of renewable energy (RE) technologies, which in turn may distort the flow of finance in the RE sector.|
Recent Investments in Nigeria
• The Bank of Industry and All On raised a N1 billion fund for Niger Delta Off-grid electrification.
• All On, a Shell funded impact investor, announced its decision to invest $1.5 million in Auxano Solar, a Nigerian solar panel producer which provides solar inverter solutions at affordable prices.
• The Ikeja Electric Distribution Company signed a N11.4 billion service contract with its consumers towards network expansion.
• The China Export and Credit Insurance Corporation (Sinosure) is providing insurance of over 85% of the total cost for the construction of the Ajaokuta-Kano-Kaduna Natural gas pipeline.
• The World Bank Board of Directors approved the Power Sector Recovery Operation finance of $750 million to improve the reliability of electricity supply in Nigeria.
• Lumos received $35 million funding from the International Development Finance Corporation, towards the provision of reliable solar power in the Nigerian power sector. In 2021, Lumos also signed a deal with Hinckley Group to recycle thousands of lithium batteries from Hinckley’s Ojota Facility located in Lagos State.
• The World Bank provided a $486 million loan to the Federal government to support its Nigeria Electricity Transmission Project (NETP).
• The Emerging Africa Infrastructure Fund (EAIF) is investing/loaning €36 million towards the creation of a natural gas fueled power plant near Benin.
• Daystar Power, a Lagos-based Solar Energy Provider has raised $38 million through support from Investment Fund for Developing Countries and Morgan Stanley Investment Management for the purpose of replacing “unreliable grid or too expensive, polluting diesel generators,” with clean reliable power in West Africa.
• The World Bank approved $500 million to support the improvement of the electricity distribution sector in Nigeria.
Nigeria has secured a $1.5 billion loan from the Export-Import Bank of the US for the development of solar power infrastructure in the country.
At a closed event on June 7, 2023, Shell funded impact investment company, All On, through its Demand Aggregation for Renewable Technologies (DART) program, announced its commitment of $11 million to support 25 mini-grid projects in Nigeria.
The ongoing reforms and initiatives in the power sector of Nigeria are:
- Presidential Power Initiative in collaboration with Siemens AG: In 2019, the Nigerian government through its Federal Ministry of Power (FMOP) began negotiating with Siemens AG for electrification of the Country. The deal involves Siemens AG undertaking a reformation of the Nigerian electricity grid in three phases that would lead to the grid possessing an operational capacity of 25,000 MW. As part of this deal, the sector looks to possess 7000 MW and 11,000 MW worth of operational capacity in 2021 (Phase 1) and 2023 (Phase 2) respectively.
- Economic Recovery and Growth Plan: The EGRP was developed in 2017 as a medium-term plan for the nation to recover from the last economic recession. The plan which runs from 2017 till the end of 2020 looks to ensure energy security and a diverse energy mix for Nigeria.
- The Power Sector Recovery Programme: The Power Sector Recovery Programme was developed by the Federal Government, in agreement with the World Bank in 2017 as an initiative to be implemented over a four-year period – between 2017 to 2021. The Programme contains sets of mechanisms tailored towards the improvement of reliability in electricity supply, the enhancement of accountability and financial sustainability for the Nigerian power sector.
- The National Mass Metering Programme: The NMMP was promulgated by the Federal Government in August 2020 with the aim of increasing the rate of metering in Nigeria, local meter manufacturing, revenue collection, and job opportunities in the sector. The program is a follow-up to the Meter Asset Provider Regulations of 2018 which was geared towards the increment of local meter manufacturing and the provision of meters to consumers across Nigeria.
- Guidelines for Secondary Escrow Account Management for Bilateral Transactions by Electricity Distribution Licensees (the Guidelines), 2023: The payment waterfall set out in the Multi-Year Tariff Order 2022 (MYTO 2022) and the Principal Collection Account (PCA) set up and managed by the NESI Stabilization Securities LTD (NESI-SSL) into which all revenues received by distribution companies (DisCos) must be paid and disbursed have made direct contracting between DisCos and generation companies (GenCos), as well as investment in the electricity distribution value chain by third parties problematic. To deal with these concerns, NERC has issued the Guidelines for Secondary Escrow Account Management for Bilateral Transactions by Electricity Distribution Licensees (the Guidelines) which provides an arrangement by which DisCos may directly enter bilateral transactions with trading partners and specially dedicated Secondary DisCo Account Escrow Arrangements (SDAs) are set up to administer the funds received by DisCos from the market with respect to these transactions.
- The Electricity Act 2023: The Act repeals the Electric Power Sector Reform Act 2005 and enact the Electricity Act 2023, to consolidate the laws relating to the Nigeria electricity supply industry, provide a comprehensive legal and institutional framework for the power sector in Nigeria in the areas of electricity generation, transmission system operation, distribution, supply, trading , enforcement of consumer rights and obligations, provide for the holistic integrated resource plan and policy that recognizes all sources for the generation, transmission, and distribution of electricity, including the integration of renewable energy to Nigeria’s energy mix , and attract investments. The Electricity Act 2023 expressly provides that companies in the power sector that venture into the generation of electricity must ensure that they do the same with renewable energy. This means that power-generating companies must either generate power from renewable sources or buy instruments that generate power through renewable energy or in the alternate, purchase renewable energy-generated power. The Act introduces state-owned and regulated electricity market, leading to the decentralization of the otherwise centralized power sector. The likely impact of this introduction is the heavy reduction of state reliance on the national grid which has over the years failed to adequately meet the power needs of Nigerians due to the imbalance in the demand and supply ratio.
- Customer Protection Regulations 2023: The Consumer Protection Regulations seek to safeguard consumers from the activities of electricity distribution companies (DisCos) in Nigeria. These regulations consolidate existing consumer protection measures, reinforce frameworks for consumer protection, promote access to electricity, align service standards with international best practices, and establish minimum standards for service delivery.
DISPUTE RESOLUTION AND JUDICIAL STRUCTURES
Disputes in the power sector are resolved through various means depending on the parties involved and the Regulation applicable to the resolution of the dispute(s). For instance, disputes between customers and distribution companies, are catered for within the Customer Protection Regulations 2023. A distribution company is required to establish customer complaint units (CCU) across its operational area to ensure ease of access to all customers. The CCUs are headed by senior officers of the distribution company. Complaints can be lodged through phone call, SMS, email or any other medium established by the distribution company.
Such complaints are to be resolved no later than 15 days except where it concern meter accuracy and reconciliation of bills, in which case it shall be resolved within a billing cycle of one month. Where a complaint is not resolved within the first 15 days, the distribution company shall notify the customer in writing with reasons and request for no more than another 15 days to resolve same, except the resolution takes a longer period by nature, like is the situation with cases involving construction projects.
Any customer dissatisfied with the outcome of the handling of his complaints by the CCU can refer such complaints to the Commission’s forum office at the expiration of the approved 30 days. The Commission is to establish a forum office across the country within the area of operation of distribution companies, which shall consist of 5 part time members, reputable persons resident in the operational area of the distribution company. The forum shall be composed of a legal practitioner with experience in alternative dispute resolutions nominated by the Nigerian Bar Association, a financial expert nominated by a reputable organization, a qualified electrical engineer nominated by the council for regulation of engineering in Nigeria, a nominee of Federal Competition and Consumer Protection Commission, and a representative of a Non-Governmental Organisation based in the distribution company’s operating area nominated by the Commission. Alternate representation from other reputable institutions can also be nominated by the Commission. Three members of the forum forms a quorum for any meeting.
In accordance with Section 42.3.7 of the Market Rules, NERC also appoints a Dispute Resolution Counsellor (DRC) who administers the provisions on dispute resolution contained in the Rules, regarding disputes between market participants. There is also a Dispute Resolution Panel constituted to hear and resolve disputes between market participants. According to Section 42.1.3 of the Market Rules, parties who wish to have the Dispute Resolution Panel hear their matter must select one or three from the twelve members constituting the panel to undertake the desired dispute resolution process. Section 43.1.2 of the Market Rules also provides for the necessary adherence of mediation, conciliation, and arbitration bodies to the provisions in the Arbitration and Mediation Act of 2023 because the Act will constitute the default relevant law in instances where the Market Rules has not provided for the procedure to be adopted regarding a dispute resolution process.
DISPUTE RESOLUTION PROCESS
This document titled the “Legal and Regulatory Brief” of the referenced country is not expected to form the basis of, or be construed as standard legal advice; nor should any of its contents and representations be strictly relied upon for any activities. Electricity Lawyer (EL) will not be liable for decisions whatsoever that are made based on the contents of the document.
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 The Glossary of Terms referenced in this brief can be found in our Glossary of Industry Terms.
 Nigeria Population 2022 World Bank < https://data.worldbank.org/indicator/SP.POP.TOTL?locations=NG >
 NERC First Quarter 2023 Report < https://nerc.gov.ng/index.php/library/documents/func-startdown/1089/>
 The general rule of thumb based on Word Bank Estimates, is that approximately every 1,000,000 people require 1000 MW of electricity. Available at World Bank. (2014). World Development Indicators. Available at: http://data.worldbank.org/products/wdi
The Electricity, Gas, Steam and Air conditioning Supply sector contributed 1.39% to the nominal GDP in Q2 2022, a 0.33%-point decrease from the corresponding period in 2021. However, this was an improvement from the previous quarter’s 0.38%. < https://nairametrics.com/2022/08/30/gdp-nigerias-electricity-sector-dips-by-11-5-in-q2-2022-following-multiple-grid-collapses/ >
 World Bank, ‘Doing Business 2020’. Available at https://www.doingbusiness.org/content/dam/doingBusiness/pdf/db2020/Doing-Business-2020_rankings.pdf
 International Trade Administration < https://www.trade.gov/country-commercial-guides/electricity-power-systems-and-renewable-energy >
 NERC First Quarter 2023 Report < https://nerc.gov.ng/index.php/library/documents/func-startdown/1089/>
 Where available transmission capacity data is not stated in MVA, it is converted using a power factor of 0.85.
 Supra, Note 11
 Access to Electricity in Nigeria, World Bank < https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=NG >
 These include legislations such as the Mini-grid Regulations, the Renewable Energy Master Plan, etc.
 S. 115 Electricity Act, 2023; Section 10, Eligible Customer Regulations 2017.
 Overcoming the Market Constraints to On-Grid Renewable Energy Investments in Nigeria. November 2019. Oxford Institute for Energy Studies. ISBN 978-1-78467-149-5. P.7. DOI: https://doi.org/10.26889/9781784671495
 P. 60, Market Rules for the Nigerian Electricity Supply Industry
 Power Sector Policy Statement, Federal Ministry of Power, Works and Housing. (June 2019). P.5 of 5. Available at https://powerlibrary.nigeriaelectricityhub.com/wp-content/plugins/download-attachments/includes/download.php?id=201
 World Bank Group, ‘Charting the Diffusion of Power Sector Reforms across the Developing World’. P. 13. November 2017. Available at https://documents.worldbank.org/curated/pt/576801510076208252/pdf/WPS8235.pdf
 T.Oyewunmi, I.Ehanmo, ‘Energy Law and Regulation in Nigeria- Prospects for Reliable Electricity Supply’ in T.Oyewunmi, P.Crossley, F.G.Sourgens, K.Talus, ‘Decabornisation and the Energy Industry- Law, Policy and Regulation in Low-Carbon Energy Markets’ (Hart Publishing, November 2020).
 NERC, ‘Nigerian Electricity Market’. Available at https://nerc.gov.ng/index.php/home/operators/ltmr/405-nigerian-electricity-market
 Section 33, Electricity Act, 2023
 Section 34, Electricity Act, 2023
 Section 5, ECN Act
 Eko Performance Agreement, Performance Agreement. (21 August 2013). Available at https://drive.google.com/file/d/14RpP2VkjmI-WReQkOke6SpufProgSqzB/view
 Section 63, Electricity Act, 2023
 NERC Press Release, ‘NERC is committed to protecting customers’. Available at https://nerc.gov.ng/index.php/media-library/press-releases/623-nerc-is-committed-to-protecting-customers
 GEPLAW Focus Volume 11 Issue 2, Infrastructure Financing in Nigeria – An assessment of the Investment environment from a policy, institutional and regulatory perspective. 2018. Available at http://geplaw.com/wp-content/uploads/2018/03/GEORGE-ETOMI-PARTNERS-MONTHLY-REPORT-issue-11b.pdf
 The World Bank, Power Sector Recovery Performance Based Operation. Available at https://projects.worldbank.org/en/projects-operations/project-detail/P164001
 International Financial Law Review, ‘2018 Project Finance Report’. Available at https://www.iflr.com/article/b1lp1tj62z8k1b/2018-project-finance-report-nigeria
 Section 31, Public Procurement Act (PPA) of 2007
 NBET, Process for Competitive Procurement. Available at https://nbet.com.ng/our-customers/generation/process-for-competitive-procurement/
 NBET, Azura-Edo IPP. Available at https://nbet.com.ng/our-customers/generation/projects/azura-edo-ipp/
 Section 226 of the Bill
 Section 141 of the Bill
 Section 126 of the Bill
 European Union, Renewable Energy Potential in Nigeria. P. 3
 All On, ‘The Bank of Industry (BOI) and All On Announce the Establishment of the Niger Delta Off Grid Energy Fund’. (2019). Available at https://www.all-on.com/media/media-releases/boi-and-all-on-announce-niger-delta-off-grid-energy-fund.html
 All On, ‘All On and Auxano Solar Nigeria sign $1.5M Investment Deal for Solar Panel Assembly Plant Expansion’. (September 2020). Available at https://www.all-on.com/media/media-releases/all-on-and-auxano-solar-nigeria-sign-dollar-1-point-5m-investment-deal-for-solar-panel-assembly-plant-expansion.html
 NNN, Ikeja Electric signs N11.4bn metering contract. (October 2020). Available at https://nnn.ng/ikeja-electric-signs-n11-4bn-metering-contract/
 NS Energy, Ajaokuta–Kaduna–Kano (AKK) Gas Pipeline. (2020). Available at https://www.nsenergybusiness.com/projects/ajaokuta-kaduna-kano-akk-gas-pipeline/
 World Bank, Nigeria to Keep the Lights on and Power its Economy. (June 2020). Available at https://www.worldbank.org/en/news/press-release/2020/06/23/nigeria-to-keep-the-lights-on-and-power-its-economy
 Lumos, Lumos unlocks DFC financing of $35 million to deliver power to one million people. (September 2020). Available at https://www.lumos-global.com/lumos-unlocks-dfc-financing-of-35-million-to-deliver-power-to-one-million-people/
 Bloomberg, Dutch Firm Signs Nigerian Deal to Recycle Solar Batteries. (March 2021). Available at https://www.bloomberg.com/news/articles/2021-03-18/dutch-firm-signs-nigerian-deal-to-recycle-solar-power-batteries?sref=EOrz2HpG
 Blueprint.ng, Nigeria gets World Bank $486m electricity project loan. (October 2020). Available at https://www.blueprint.ng/nigeria-gets-world-bank-486m-electricity-project-loan/
 Africa Energy Portal, Benin Power Station Project receives funding. (August 2020). Available at https://africa-energy-portal.org/news/benin-power-station-project-receives-funding
 Bloomberg Green, Nigeria Solar Firm Gets $38 Million to Expand in West Africa. (January 2021). Available at https://www.bloomberg.com/news/articles/2021-01-12/nigeria-firm-gets-38-million-to-expand-solar-access
 World Bank, Nigeria to Improve Electricity Access and Services to Citizens. (February 5, 2021). Available at https://www.worldbank.org/en/news/press-release/2021/02/05/nigeria-to-improve-electricity-access-and-services-to-citizens
 Africa Oil and Power, ‘Siemens AG to Expand Nigeria’s Power Capacity to 25,000 MW’. (June 1 2020). Available at https://www.africaoilandpower.com/2020/06/01/siemens-ag-to-expand-nigerias-power-capacity-to-25000-mw/
 State House, ‘Economic Recovery and Growth Plan’. Available at https://statehouse.gov.ng/policy/economy/economic-recovery-and-growth-plan/
 World Bank, ‘Nigeria – Power Sector Recovery Operation’. (June 23, 2020). Available at https://www.worldbank.org/en/news/loans-credits/2020/06/23/nigeria-power-sector-recovery-operation