Do not fragment a market that is beginning to work
Why the proposed Electricity Act amendment could undermine Nigeria’s renewable energy growth
Nigeria is at a critical stage in its electricity sector reform, with distributed renewable energy emerging as a promising solution to the country’s long-standing electricity access challenges.
For decades, the focus has been on how to provide reliable electricity to millions of Nigerians, particularly those in communities where extending the national grid is slow, expensive or economically difficult.
Today, the situation is gradually changing. Mini-grids are becoming commercially viable, private developers are investing, financial institutions are entering the market, states are assuming greater responsibility for electricity regulation, and local renewable energy manufacturing is expanding.
Digital technologies are also improving metering, monitoring and revenue collection, while Renewable Energy Service Companies (RESCOs) are creating new business opportunities.
However, the proposed Electricity Act (Amendment) Bill, 2025 seeks to establish a National Authority for Renewable Energy (NARE), transferring renewable energy responsibilities currently handled by the Nigerian Electricity Regulatory Commission (NERC), the Rural Electrification Agency (REA) and the Rural Electrification Fund (REF) to the proposed institution.
Public reports have also indicated a proposal to allocate 40 per cent of the annual Rural Electrification Fund to NARE.
While the intention to strengthen renewable energy development is understandable, the proposed arrangement requires careful reconsideration. It could introduce fresh regulatory uncertainties, weaken existing institutional coordination and discourage the private investment needed to expand electricity access.
The issue is not whether renewable energy deserves greater attention. It certainly does. The real question is whether creating another institution will deliver more electricity, increase connections, support local manufacturing and attract additional investment.
That should be the standard against which the proposed amendment is assessed.
A growing market needs clarity, not complexity
Renewable electricity can no longer be treated as a separate sector that operates independently of the wider electricity market.
Consider an interconnected mini-grid that combines solar generation, battery storage, smart meters, distribution infrastructure and digital payment systems while operating alongside a distribution company’s network.
If NARE regulates the renewable generation component while NERC or a State Electricity Regulatory Commission oversees the distribution network, questions arise about who determines tariffs, approves interconnection, resolves technical disputes and protects consumers.
These are practical concerns that directly affect project financing.
Investors require clear rules, predictable approvals and certainty about the institutions responsible for regulating their investments. Additional regulatory layers could mean more approvals, conflicting interpretations and longer project timelines.
Such uncertainties increase the cost of capital and may ultimately affect electricity prices or prevent projects from reaching financial close.
Nigeria should therefore simplify the process of converting investment into electricity, rather than make it more complicated.
The challenge is coordination, not a shortage of regulators
The Electricity Act 2023 fundamentally changed Nigeria’s electricity architecture by enabling states to establish and regulate their intrastate electricity markets.
By July 2026, NERC had reported the transfer of regulatory oversight to 16 states. The Federal Government has also convened relevant institutions to address legal, policy and regulatory harmonisation within the emerging multi-tier electricity market.
These developments demonstrate that Nigeria is already managing a significant decentralisation of electricity regulation.
Introducing another federal regulator organised around renewable energy could create a new layer of jurisdiction involving NERC, State Electricity Regulatory Commissions, NARE and other institutions responsible for technical standards and electricity infrastructure.
Rather than resolving existing coordination challenges, the proposal could complicate the regulatory environment.
Nigeria needs stronger cooperation among existing institutions, clearer responsibilities and more efficient approval processes. Creating another regulator should not be the default response to coordination problems.
Protecting the momentum of private investment
The timing of the proposed amendment is particularly important because Nigeria’s distributed renewable energy market is beginning to attract significant investment.
The World Bank-supported Distributed Access through Renewable Energy Scale-up (DARES) programme, valued at $750 million, is designed to provide new or improved electricity access to more than 17.5 million Nigerians. Its targets include 1,225 mini-grids and 465 megawatts of renewable energy generation.
The programme places private-sector-led distributed renewable energy at the centre of its implementation strategy.
It builds on the Nigeria Electrification Project, which has impacted more than 7.8 million Nigerians through clean energy initiatives, with over 1.1 million households receiving new or improved electricity services.
These achievements reflect years of work involving developers, financiers, technology providers, communities, regulators, development partners and government institutions.
More than 1,000 mini-grids are also under development through programmes being implemented by REA.
Meanwhile, Nigerian financial institutions are increasingly recognising distributed renewable energy as an investible asset class. REA has signed financing memoranda of understanding with FCMB for ₦100 billion, Lotus Bank for ₦100 billion, Alpha Morgan for ₦50 billion and Stanbic IBTC for ₦100 billion.
Together, these agreements represent potential domestic financing commitments of ₦350 billion.
This is an important development for an industry that has historically relied heavily on government funding and international development finance.
Nigeria should be building on this momentum by providing investors with a stable and predictable regulatory environment.
Investors considering infrastructure projects with 15- to 20-year investment horizons need to know which regulations apply, who issues licences, how tariffs are determined and what happens when projects operate across federal and state regulatory jurisdictions.
They also need certainty about existing licences, grants, contracts and concessions if institutional responsibilities change.
Every uncertainty introduces risk. Higher risk increases financing costs, which may translate into higher tariffs, greater subsidy requirements or projects that never proceed.
If Nigeria hopes to mobilise billions of dollars for renewable energy, its institutional framework must become clearer and more predictable.
Market development and regulation are different functions
There is also an important distinction between regulating an electricity market and developing that market.
NERC regulates electricity markets, while REA focuses on expanding electricity access in underserved and unserved communities where conventional commercial arrangements may not be sufficient.
REA helps aggregate opportunities, support project preparation, structure interventions, mobilise concessional funding and attract private capital into markets that would otherwise struggle to attract investment.
Combining renewable energy promotion, project development, licensing, tariff regulation, technical oversight and dispute resolution within a single institution could blur these responsibilities.
An institution responsible for promoting a market should not necessarily be the same institution that regulates its participants and resolves disputes.
Nigeria should preserve clear institutional roles while strengthening collaboration among agencies.
If a dedicated national renewable energy institution is considered necessary, its mandate should focus on functions that are not adequately served by existing institutions, including investment promotion, green finance mobilisation, research and innovation, renewable energy resource mapping, manufacturing, skills development and intergovernmental coordination.
Such an institution could strengthen the sector without creating a parallel electricity regulator.
Nigeria needs institutions that help renewable energy businesses navigate the market, not additional institutions they must navigate.
The Rural Electrification Fund must remain focused on access
The proposal to allocate 40 per cent of the annual Rural Electrification Fund to NARE also deserves careful consideration.
The Fund exists to address electricity access challenges in communities where low customer density, limited purchasing power or insufficient initial demand makes commercial investment difficult.
Public intervention helps bridge this gap and makes electricity projects viable in places where the private sector might otherwise be reluctant to invest.
Renewable energy is often the most suitable technology for such communities, but the ultimate objective of the Fund is electricity access, not the promotion of a particular technology.
Allocating a substantial share of the Fund to support another institution’s operations or mandate could divert resources from the purpose for which they were established.
Every naira spent from an electricity access fund should be assessed against a simple question: How many additional Nigerians will gain access to reliable electricity as a result?
Building a renewable energy industry
Beyond government programmes, Nigeria is witnessing the emergence of renewable energy service companies capable of financing, constructing and operating distributed energy infrastructure.
Fintech companies are developing solutions for mini-grid monitoring, revenue collection and asset management. Developers with experience in Nigeria are increasingly positioned to operate in other African markets, while the country’s renewable energy manufacturing pipeline is estimated at approximately 3.7 gigawatts.
These developments show how industries grow when government creates an enabling environment.
Private businesses respond, capital enters, skills develop, supply chains expand, technology improves and competition helps reduce costs.
At this stage, institutional stability becomes an economic asset. Nigeria should be cautious about changing the rules just as the market is beginning to respond to existing policies and programmes.
This does not mean the current framework is perfect. Project approvals can be improved, federal and state regulatory responsibilities clarified, data systems integrated, technical standards strengthened and financing expanded.
Local manufacturing also requires greater support, while project development timelines must be shortened.
However, these challenges can be addressed through stronger coordination, clearer regulations and more effective implementation without necessarily creating another regulator.
Consolidate reforms before introducing new layers
The Electricity Act 2023 is still relatively new, and the market it established continues to evolve. States are building regulatory capacity, investors are adjusting to new arrangements, and federal institutions are learning to operate within a decentralised electricity framework.
Development partners have also structured long-term programmes around the existing institutional architecture.
This is therefore a time to consolidate reforms, clarify responsibilities and accelerate implementation.
As the National Assembly considers the proposed amendment, lawmakers should examine not only the importance of renewable energy, on which there is broad agreement, but also the potential consequences of the proposed institutional structure.
A detailed regulatory impact assessment is necessary. State governments, investors, lenders, developers and other stakeholders should be consulted. The implications for existing World Bank, African Development Bank and other development finance commitments should also be examined.
Most importantly, lawmakers should determine whether the proposal will reduce or increase the number of institutional approvals required to move a renewable energy project from conception to operation.
If a new institution is established, its responsibilities must complement those of existing agencies, respect the constitutional and statutory roles of states, and provide a clear benefit to electricity consumers.
Nigeria does not suffer from a shortage of institutions. Its challenge is making those institutions work together within a coherent electricity market.
The country needs a system in which federal and state governments, regulators, financiers, developers, manufacturers, technology companies and communities can work together to expand electricity access and attract investment.
Judge reforms by the results they deliver
The proposed amendment presents the National Assembly with an opportunity to strengthen Nigeria’s renewable energy sector. That opportunity should not be lost to institutional duplication or avoidable regulatory uncertainty.
Nigeria should protect the progress already made, strengthen what works, correct existing weaknesses and provide greater certainty for investors.
Creating a new institution should never be mistaken for solving a market problem.
The real measure of electricity reform is not the number of agencies established. It is the number of homes connected, businesses powered, megawatts deployed, investments mobilised and improvements made to the reliability of electricity supply.
That is the standard Nigeria needs.
And it should be the standard against which every proposed amendment to the Electricity Act is judged.
By Dr Abba Aliyu, Managing Director/Chief Executive Officer, Rural Electrification Agency
