EXPLAINER: President Tinubu’s Nigerian Electricity Act vs Buhari’s Fifth Alteration Bill No. 33, devolution of powers

EnergyDay’s check showed that the investment opportunities that would have been recorded in the Nigerian Electricity Supply Industry (NESI) have been stifled over the last eighteen years after the Electric Power Sector Reform Act (EPSRA) was passed by the National Assembly and signed into law by former President Olusegun Obasanjo, in 2005.

It was on the basis of unlocking the various opportunities for growth and need to align the framework in the power sector with modern realities that former President Muhammadu Buhari, in March 2023, signed into law the constitutional amendment, allowing states to generate, transmit, and distribute electricity in areas covered by the national grid, before the expiration of his eight-year reign.

President Bola Tinubu, in less than two weeks after his inauguration assented to the electricity bill, which was passed by the 9th National Assembly in July 2022, repealing Obasanjo’s Electricity and Power Sector Reform Act, 2005.

Experts who spoke on the subject matter with EnergyDay emphasised that the NESI lacked a clear framework that would change the dimensions of the challenges of the power sector. They added that the single market structure operated in the last 18 years, has thus far failed to address the energy needs of millions of Nigerians.

According to them the lack of direction has limited the gains that could have been achieved so far since  2013 when the generation and distribution sub-sector were privatised.

The experts in their views, therefore, said that the latest assent to the Nigerian Electricity Act by President Tinubu has consolidated all legislations in the power sector into one electricity statute, with the ultimate aim of improving Nigeria’s power generation capacity.

Engr.  Olalere Odusote, the former Lagos State Commissioner for Energy and Mineral Resources, in a comment on the act, said that the Lagos State Government has been steadily anticipating the assent to the electricity act for many years.

He said that the Lagos state Government has taken proactive steps towards implementing an effective institutional framework for a viable Lagos Electricity Market.

Odusote said, “The Governor Babajide Sanwoolu’s administration, in 2022, developed a comprehensive Integrated Resource Plan( IRP) , the first of its kind by a subnational government, which clearly outlines the current and future electricity needs of the State.

“The Governor identified the infrastructure gap required to meet the same in the short, medium, and long term. The IRP seeks to increase the overall energy security for Lagos State and provides guidance for development planning for the next 20 years to meet an anticipated 400% increase in peak electricity demand by 2040.

Engr. Odusote, therefore, said that Lagos State is now well positioned to fully drive the implementation of a viable Lagos Electricity Market with a bankable commercial framework that guarantees the economic sustainability of the sector and the socio-economic development of Lagos State.

Mr Martins Arogie, Chairman, Power Sector Group, Lagos Chamber of Commerce and Industry, LCCI, in a chat with EnergyDay explained that former President Mohammadu Buhari assented to a constitutional amendment, which only addressed the exclusive right given to the Federal Government to regulate the affairs of the power sector, thereby strengthen the right of the sub nationals to participate in Nigerian Electricity Supply Industry.

 

“The now defunct Electricity Power Sector Reform Act(2005) basically assumed that there will be one industry regulator and one electricity market exclusively regulated by the Federal Government.

 

“Unfortunately the amendment to the constitution didn’t address the issue of the role of NERC amongst others in the sun national markets. We could have been operating a system that permits the states the right to participate in the market, but still be subjected to the regulatory dictates of NERC, under the ESPRA 2005.

 

“That would have been a major issue, thereby making it difficult for any investor to operate effectively at the state level because they would be subject to two operational licenses from both NERC and subnational regulators. What the National Assembly had done preparatory to the amendment of the constitution was to pass the ESPRA amendment bill that delineated the power of NERC, thus limiting its regulatory functions to only entities engaged in the business of power across multiple State jurisdictions.

 

“With the new electricity act signed by President Tinubu, power sector investors operating within a state will not need two licenses, they will only deal with the state electricity regulatory authority. The Nigeria Electricity Act signed by President Bola Tinubu was specific and it has given clarity as to how the States and NERC would work in order to ensure that there are no conflicts or duplications of responsibilities.

 

“The Senate presented the Nigeria Electricity Act to former President Buhari which he never assented to until the expiration of his administration, and there is no way that the constitutional amendment by Buhari would have worked effectively without the assent to the Electricity Act which gives the clarity that is required for the delineation to work,”Arogie who is also the Partner, Energy and Natural Resources (ENR) unit of the Tax, Regulatory and People Services division of KPMG.

Mr. Emeke Ojoko, Executive Coordinator of NEPA Wahala, an electricity consumers’ rights group, said that prior to March 17, 2023, the States could only pass laws for the generation, transmission, and distribution of electricity in areas not covered by the national grid.

He said, “That meant that, in any place where both the electricity distribution and transmission lines pass in a state, the state government couldn’t do anything significant about power supply or carry out any intervention there. Even if there has been no power in distribution lines since it was installed.

“Ex-President Buhari removed that disability when he assented to the constitutional amendment in March 2023. This meant, states could now make laws for power generation, transmission, and distribution in areas already covered by the national grid.

“Despite that amendment, a little legal problem remained legally known as “covering the field”. It basically means that a state legislature cannot make laws on any subject where the federal legislature has already passed a law that fully covers that subject.

“Any such law passed by the state would be liable to be set aside as ultra vires (beyond the powers of) the state.

“Under the now-repealed Electric Power Sector Reform Act (“EPSRA”) 2005, the Nigerian Electricity Regulatory Commission (“NERC”) had exclusive power to regulate the entire Nigerian electricity industry.

“If a state made any law to regulate areas already covered by the national grid (as they now had a right to do immediately after the constitutional amendment was made), which areas were already regulated by NERC, such state law would be inconsistent with the EPSRA 2005. Such a law could be successfully challenged.

 

“So it became necessary to pass a new Electricity Act that conforms with the amended constitution. Therefore, the new Act, signed by President Tinubu, among other things, says that, once a state makes laws for and establishes its own electricity market, NERC will cease to regulate the industry in such a state,” Mr. Ojoko.

The NEPA Wahala Executive Coordinator, therefore, noted that any potential conflict between federal and state laws has been removed.

 

Contrary to the assumption that electricity was on the Exclusive Legislative list, before Buhari’s assent on the constitutional amendment, Mr Ojoko emphasised that electricity has always been on the concurrent legislative list, but ineffective due to the provisions of ESPRA 2005.