Nigeria’s Electricity Supply Industry (NESI)
The Nigerian Electricity Supply Industry (NESI) is primarily made up of the Generation Companies (GenCos), the Transmission Company of Nigeria (TCN), the Distribution Companies (DisCos), and the consumers. The NESI transmission network is used for the bulk movement of electrical energy from a generating site, such as a power station or power plant, to a substation where voltage is transformed and distributed to consumers or other substations. The interconnected lines that enable the movement of electrical energy are known as a “transmission network,”. These form an electrical power transmission system or, as it is more commonly known, the power grid.
The Nigerian Electricity Supply Industry (NESI) has undergone fundamental changes over the past few years with the implementation of the government’s reform programme reputed to be one of the most ambitious privatisation exercises in the global power industry with a transaction cost of over three billion dollars ($3.0bn)
The Nigeria Electricity Supply Industry (NESI) has the following industry participants:
- Federal Ministry of Power
- Nigerian Electricity Regulatory Commission
- Electricity Generation Companies (GenCos)
- Transmission Company of Nigeria (TCN)
- Electricity Distribution Companies(DisCos)
- Nigerian Bulk Electricity Trading Plc
- Gas Aggregator Company of Nigeria
- Nigerian Electricity Management Service Agency (NEMSA)
- There are presently 23 grid connected generating plants supplying power in the country.
The Federal Ministry of Power is the policy making arm of the Federal Government with the responsibility for the provision of power in the country. The Ministry in discharging this mandate is guided by the provisions of the National Electric Power Policy (NEPP) of 2001, the Electric Power Sector Reform (EPSR) Act of 2005, the Roadmap for Power Sector Reform of August 2010 and the Electricity Act 2023.
The Function of the Federal Ministry of Power
The responsibilities of the Federal Ministry of Power are as follows:
- Initiating and formulating broad policies and programmes on the development of the power sector (electricity) in general;
- Initiating concessions in the power sector of the economy;
- Licensing of electric generating sets of 1MW capacity and below and electrical contractors;
- Conducting investigation on electrical accidents and to ensure safety in the electricity industry in Nigeria;
- Conducting statutory tests and certification of electric poles (concrete, wooden, steel etc) and other major electrical materials before they are used on the grid and networks in Nigeria;
- Implementing Renewable Energy progammes/initiatives (Solar, Wind, Biomass, Small Hydro etc);
- Coordinating activities of power sector;
- Handling policy matters relating to research and development in the Power Sector;
- Promoting the development of hydro power plants through public private partnership (PPP);
- Participating in bilateral and multilateral relations affecting the power sector; and
- Facilitating the overall coordination of the activities of the Parastatals under its supervision.
The Nigerian Electricity Regulatory Commission (NERC) is an independent body, established by the Electricity Act 2023 to undertake technical and economic regulation of the Nigerian Electricity Supply Industry. The Commission is to, among others license operators, determine operating codes and standards, establish customer rights and obligations and set cost reflective industry tariffs. The Commission has its headquarters in Abuja, and currently has presence in most states of the country through its Forum Offices which function as the first level of escalation for customer complaints that are not resolved by the electricity distribution companies (DisCos).
Power generation in Nigeria dates back to 1886 when two (2) generating sets were installed to serve the then Colony of Lagos. By an Act of Parliament in 1951, the Electricity Corporation of Nigeria (ECN) was established, and in 1962, the Niger Dams Authority (NDA) was also established for the development of hydroelectric power. A merger of the two (2) organisations in 1972 resulted in the formation of the National Electric Power Authority (NEPA) which was saddled with the responsibility of generating, transmitting and distributing electricity for the whole country. In 2005, as a result of the power sector reform process, NEPA was unbundled and renamed Power Holding Company of Nigeria (PHCN).
The Electric Power Sector Reform (EPSR) Act was signed into law in March 2005, enabling private companies to participate in electricity generation, transmission, and distribution. The government unbundled PHCN into eleven electricity distribution companies (DisCos), six generating companies (GenCos), and a transmission company (TCN). The Act also created the Nigerian Electricity Regulatory Commission (NERC) as an independent regulator for the sector.
Transmission Company of Nigeria (TCN) manages the electricity transmission network in the country. It is one of the 18 companies that was unbundled from the defunct Power Holding Company of Nigeria (PHCN) in April 2004 and is a product of a merger of the transmission and system operations parts of PHCN. It was incorporated in November 2005 and issued a transmission license on July 1, 2006. TCN is presently fully owned and operated by the government and as part of the reform programme of the government, it is to be reorganised and restructured to improve its reliability and expand its capacity.
TCN’s licensed activities include: electricity transmission, system operation and electricity trading. It is responsible for evacuating electric power generated by the electricity generating companies (GenCos) and wheeling it to distribution companies (DisCos). It provides the vital transmission infrastructure between the GenCos and the DisCos’ Feeder Sub-stations.
Nigeria’s transmission network consists of high voltage substations with a total (theoretical) transmission wheeling capacity of 7,500MW and over 20,000km of transmission lines. Currently, transmission wheeling capacity (5,300MW) is higher than average operational generation capacity of 3,879MW but it is far below the total installed generation capacity of 12,522MW. The entire infrastructure is essentially radial, without redundancies thus creating inherent reliability issues. At an average of approx. 7.4%, the transmission losses across the network are high compared to emerging countries’ benchmarks of 2-6%. The number of system collapses has fallen over the past years from a peak of 42 in 2010 to a few last year. All these reflects the critical infrastructure and operational challenges in the transmission subsector of the industry.
There are 11 Electricity Distribution Companies (DisCos) in Nigeria providing power supply to different areas (franchise areas), namely:
- Abuja Electricity Distribution Company (AEDC) – Abuja FCT, Niger, Kogi, and Nassarawa States.
- Benin Electricity Distribution Company (BEDC) – Edo, Delta, Ondo, and part of Ekiti States.
- Eko Electricity Distribution Company (EKEDC) – parts of Lagos State.
- Enugu Electricity Distribution Company (EEDC) – Enugu, Abia, Imo, Anambra, and Ebonyi States.
- Ibadan Electricity Distribution Company (IBEDC) – Oyo, Ogun, Osun, Kwara, and parts of Ekiti States
- Ikeja Electric (IE) – parts of Lagos State.
- Jos Electricity Distribution Company (JEDC) – Plateau, Bauchi, Benue, and Gombe States.
- Kaduna Electricity Distribution Company (KAEDC) – Kaduna, Sokoto, Kebbi, and Zamfara States.
- Kano Electricity Distribution Company (KEDC) – Kano, Jigawa, and Katsina States.
- Port Harcourt Electricity Distribution Company (PHEDC) – Rivers, Cross River, Bayelsa, and Akwa Ibom States.
- Yola Electricity Distribution Company (YEDC) – Adamawa, Borno, Taraba, and Yobe States.
The Nigerian Bulk Electricity Trading (NBET) Plc. is the manager and administrator of the electricity pool (‘The Pool’) in the Nigerian electricity supply industry (NESI). It was incorporated on the 29th day of July 2010 and is 100% owned by the Federal Government of Nigeria.
Nigeria Bulk Electricity Trading Plc is a wholly Federal Government of Nigeria owned company incorporated on July 29 2010 as part of the roadmap for power sector reform towards the full implementation of the Electric Power Sector Reform Act (EPSRA)
NBET carries out the role of a “Pool” Administrator for the Nigerian Electricity Market, as it continues to conclude PPA’s in its deal pipelines; and expects to transition to full competitive procurement for electricity from all sources of fuel.
The objects of the company as set out in its Memorandum of Association are:
• To undertake the business of trading in the wholesale electricity market as bulk purchaser and bulk seller of electricity and ancillary services pursuant to the Electric Power Sector Reform Act 2005.
• To take over the contract management and obligations of the Federal Government of Nigeria under existing Power Purchase Agreements (PPAs).
• To assume active obligations in the gas sector pursuant to its designated role as the Federal Government of Nigeria’s anchor for gas supply guarantees.
• To do all such other things as are incidental or may be thought conducive to the attainment of the above objects or any of them.
Gas Aggregation Company Nigeria Limited (“GACN”) was incorporated in January, 2010 further to the National Domestic Gas Supply and Pricing Regulations, 2008 (the Regulations) as the “Strategic Aggregator” for the Nigerian domestic gas market and the vehicle for the implementation of the Nigerian Gas Master Plan.
The strategic position of GACN is further solidified by the enactment of the Petroleum Industry Act, 2021 (the “PIA”) which amongst others, mandates the domestic gas aggregator to support and manage the implementation of the Domestic Gas Delivery Obligation (formerly known as the Domestic Gas Supply Obligation) for the purpose of enhancing natural gas utilization in Nigeria. This is consistent with the objectives of the Federal Government of Nigeria to pursue a sustainable growth path by leveraging gas for the economic growth of the country, and for the enhancement of Nigeria’s energy transition.
Nigerian Electricity Management Services Agency (NEMSA) was set up by NEMSA Act No.6 of 2015 to carry out the Functions of Enforcement of Technical Standards and Regulations, Technical Inspection, Testing and Certification of All Categories of Electrical Installations, Electricity Meters and Instruments to ensure the Efficient Production and Delivery of Safe, Reliable and Sustainable Electricity Power Supply and Guarantee safety of Lives and Property in the Nigerian Electricity Supply Industry; and for Related Matters.
To be an efficient world class technical enforcement Agency that ensures standardization, specification, quality, safety and competence for the competitive Nigerian Electricity Supply Industry and other allied industries.
To ensure efficient, stable, safe and reliable networks for electricity supply; safety of lives and property in the Nigerian Electricity Supply Industry through appropriate and innovative technology employing a well motivated workforce.