Nigeria’s landmark decentralisation of its electricity market is struggling to mobilise the billions of dollars required to revamp the power sector, as lingering uncertainties around payment security, sub-national creditworthiness, and regulatory frameworks continue to deter investors.
BusinessDay’s checks show that despite the enactment of the Electricity Act 2023, only 16 states have secured the legal autonomy to regulate their local power markets. They include Enugu, Ekiti, Ondo, Imo, Oyo, Edo, Kogi, Lagos, Ogun, Niger, Plateau, Abia, Nasarawa, Anambra, Bayelsa, and Gombe states.
Of this group, just seven—Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi—have fully assumed regulatory control. The remaining states, including major commercial hubs like Lagos and Ogun, as well as Niger, Plateau, Abia, Nasarawa, Anambra, Bayelsa, and Gombe, are still navigating the transition phase.
Explaining why the newly decentralised market has yet to trigger an investment boom, Ayodele Oni, an energy sector analyst and partner at Bloomfield LP, told BusinessDay that the primary obstacle is a fundamental bankability deficit rather than a lack of investor appetite.
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According to Oni, most state markets simply lack creditworthy buyers, secure payment structures, predictable tariffs, and sufficient scale.
“A subsidiary incorporated eighteen months ago has no audited history and no balance sheet, and lenders finance cash flow rather than enthusiasm. There is no state equivalent of the payment assurance instruments that supported the federal market, no escrow, no standby letter of credit, no backstop for a state power purchase agreement.
“So, devolution has not removed regulatory risk; it has multiplied it. Investors also will not fund contested competence, so the federal and state boundary needs settling quickly. And a single state’s load is often sub-scale, which argues strongly for regional pooling and harmonised licensing,” Oni said.
Speaking on why the financial capacity of state governments is not considered a requirement for granting regulatory autonomy to states, Oni explained that while the financial capacity of state governments matters enormously as a criterion for granting autonomy, it could not lawfully have been made a condition.
He said that while no regulator can impose a means test on a House of Assembly, what happens instead is that financial capacity returns as a consequence rather than a condition.
According to Oni, financial capacity is required to fund the regulator itself, fund any tariff set below cost, as well as to carry guarantees or equity in the state utility.
“The Act asks whether a state is empowered. It does not ask whether a state is ready. Those are different questions, and only one of them keeps the lights on. The remedy is not an amendment creating a gate; it is disclosure: each transitioning state should publish a readiness and funding statement.
“What has been devolved is regulation, not electricity. A transfer order moves the regulator’s pen; it does not move the gas price, the grid, or the distribution company’s balance sheet. So a state regulator inherits a tariff whose cost base is largely determined upstream by parties it cannot bind,” he added.
Also speaking to BusinessDay, Adetayo Adegbemle, power sector analyst and executive director of PowerUp Nigeria, said the success of the decentralised market hinges on states designing regulations that attract investment.
Citing Lagos State, for example, Adegbemle said that the state’s regulatory approach is poised to drive higher investment and accelerate its growth relative to other states.
He added that surrounding states like Kogi could benefit by aligning their regulations with Lagos’s model, while Lagos itself could eventually become an electricity exporter to neighboring regions.
“The decision that Lagos State is taking will encourage more investment to go to Lagos, and Lagos will continue to develop faster than others. So if a neighbouring state like Kogi State can now see how to wrap their own regulation around benefiting from Lagos, perfect. And if it is Lagos State that will end up exporting power to any other state after them, it is also good,” he said.
He, however, dismissed concerns about states lacking the resources to handle electricity markets, challenging the notion by asking how ready Nigeria itself was when the power sector reform began.
He emphasised that different models were already emerging, pointing to the collaboration between Jigawa, Katsina, and Kano as one successful approach.
“We have seen the model that Enugu took earlier and its result. So we should allow every state to learn, to evolve what works best in their situation. Since we said we are decentralising this thing, we should know that there is no one-size-fits-all going forward.
“So some states will do well, some states will fail, and then some states will wait for those to fail so that they can gain from it. So the argument of whether states are ready or not is irrelevant at this point, because when Nigeria itself started the power sector reform, it was not as if the knowledge was there.
“You know, so allow everybody to do what they want to do. Some states will decide to still come together and follow the model that Kano, Katsina, and Jigawa is laying down. Some states will follow them,” he said.
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