Nigeria Energy Situation

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Nigeria

Capital:

Abuja

Region:

Coordinates:

8.0000° N, 10.0000° E

Total Area (km²): It includes a country's total area, including areas under inland bodies of water and some coastal waterways.

923,770

Population: It is based on the de facto definition of population, which counts all residents regardless of legal status or citizenship--except for refugees not permanently settled in the country of asylum, who are generally considered part of the population of their country of origin.

223,804,632 (2023)

Rural Population (% of total population): It refers to people living in rural areas as defined by national statistical offices. It is calculated as the difference between total population and urban population.

46 (2023)

GDP (current US$): It is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.

362,814,951,696 (2023)

GDP Per Capita (current US$): It is gross domestic product divided by midyear population

1,621.12 (2023)

Access to Electricity (% of population): It is the percentage of population with access to electricity.

60.50 (2022)

Energy Imports Net (% of energy use): It is estimated as energy use less production, both measured in oil equivalents. A negative value indicates that the country is a net exporter. Energy use refers to use of primary energy before transformation to other end-use fuels, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport.

-93.03 (2014)

Fossil Fuel Energy Consumption (% of total): It comprises coal, oil, petroleum, and natural gas products.

18.88 (2014)

Source: World Bank

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Introduction

Nigeria is a federal republic comprising 36 states and the Federal Capital Territory as well as 774 Local Government Areas. The country is further divided into six geopolitical zones (North Central, North West, North East, South West, South East and South South). The country has a surface of nearly 1 million sq. km and a population of about 173 million growing at an average of 2% annually. The economy, heavily dependent on the export of oil products, grows at an average of 6% annually. The country enjoys a tropical climate in the south and central belt and an arid/semi-arid climate in the north. It is endowed with vast natural resources; oil and gas, solar (particularly in the north), hydropower (incl. 277 small hydro identified sites with a cumulative potential of 3,500 MW) and wind (mainly in the north and along the coastal line).

Energy Situation

According to the statistics from the International Energy Agency (IEA), total Nigerian primary energy supply was 118,325 ktoe (excluding electricity trade) in 2011. As depicted in the figure below, biomass and waste dominated with 82.2%. Renewable energy sources only accounted for a small share of the energy supply. For instance hydropower only accounted for 0.4%. Wind and solar are also utilized, but at a negligible level at present.

Figure 1: Energy supply by source in 2011 in percentages

Source: IEA, 2013: http://www.iea.org/statistics/topics/Electricity/

Actually, biomass is the dominant energy source in Nigeria due to the fact that most of the country’s population use it for cooking. According to Sustainable Energy For All (SE4ALL), little progress has been made with regards to providing access to non-solid cooking fuels since 1990. As visible in the figure below, in 2010, only 26% of the population had access to non-solid cooking fuels with a big difference between urban and rural areas.

Figure 2: Access cooking fuels in rural and urban areas in 2010 (in %)

Source: Sustainable Energy For All, 2013, Global Tracking Framework, p. 267

As per the chart below, in terms of the distribution of the energy demand, in 2011, the total final consumption was 108,947 ktoe, of which the residential sector accounted for most of the energy consumed.

Figure 3: Energy consumption by economic sector in ktoe

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Source: IEA, 2013

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Electricity

With a marginal share of 2% in the total final energy consumption, electricity remains a secondary source of energy in Nigeria. Only about 9% of the household’s total energy consumption which, as previously shown, is driven by the use of biomass.

As of 2008, there were a total of 4,747,870 registered customers connected to the distribution grid. Electricity consumption from residential and commercial sectors represented 80% of the total electricity demand. The rest was covered by the Industrial, Street Lighting and Special Tariff sectors. The share of large consumers, such as industry or large commercial areas, only represented 1% of the total electricity consumption.

As shown in the graph below, compared to the other West African countries, Nigeria’s electrification rates are relatively high, but have progressed at a relatively slower pace. In 2010, electrification rates were at 48% and had only increased by 5% since the early 1990s.

Figure 4: Trends in electrification rates in West Africa from 1990 to 2010

Source: Sustainable Energy For All, 2013, Global Tracking Framework

As it can be seen in the figure below, the gap between rural and urban electrification rates is lower than in other West African countries, but remains significant (Rural: 35% and Urban: 62%).

Figure 5: Urban and rural electrification rates in West Africa in 2010

Source: Sustainable Energy For All, 2013, Global Tracking Framework

Access rates also vary substantially amongst the states of Nigeria. For instance, according to the projections of the Japanese International Cooperation Agency (JICA), Taraba State had the lowest electrification rate in 2010 with 21% and Lagos the highest with 96%. Out of the 13 states that registered the lowest electrification rates, 10 were located in the North-West and North-East. The 8 states with the highest electrification rates were located in the South-West or South-South.

Figure 6: Trends in electrification rates per state

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Source: JICA, February 2007, The Master Plan Study for Utilization of Solar Energy in the Federal Republic of Nigeria, Final Report, Volume 1, p. 3-20

As a result of high economic growth and demographic pressure, in 2008, the Energy Commission of Nigeria (ECN) together with the International Atomic Energy Agency (IAEA) projected a demand of 15,730 MW for 2010 and 119,200 MW for 2030 under the reference scenario (7% yearly economic growth). Other actors like the defunct Power Holding Company of Nigeria (PHCN) or World Alliance for Decentralized Energy (WADE) et al. have also developed scenarios. The results of these studies vary widely, but they all conclude that the current gap between supply and demand is already very substantial (1:3) and that, it will continue widening if under a business as usual scenario.

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On-grid Generation

State

Installed capacity increased by 5,600 MW over the period 1968 to 1991. However, the lack of significant investment in maintenance of the existing and in the construction of new infrastructure resulted in the decrease of capacity throughout the 1990s and 2000s. As of mid-2014, there were a total of 56 licenses for on-grid generation, 36 on-grid IPP licenses with a total on-grid generation capacity of 19,407 MW, mostly thermal generation installed in the South of the country where the oil and gas fields are located. However, out of this figure, only 11,774 MW have been built. Due to poor maintenance, only 6164.13 MW are currently available.

Most of the generation capacity is based on natural gas. The share of large hydropower has decreased due to the Government’s focus on thermal. This trend is expected to continue in the future. The thermal/hydro mix is 85.5/14.5 for the installed capacity and 83.5/16.5 for the available generation capacity. Regular gas supply shortages, which are the result of vandalization and unattractive gas supply tariffs, further contribute to the reduction in the total available generation which was estimated at 3,600 MW in December of 2013. As of early, the power supply remains below 3000 MW with high fluctuations.

Figure 7: Generation connected to the transmission network

Source: Nigerian Energy Support Programme, November 2014, The Nigerian Energy Sector - an Overview with a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification
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Challenges

As previously mentioned, the big gap between demand and supply, has led to recurrent power shortcuts. The fast growth in the power demand due to high demographic pressure and economic development make the task of bridging the gap even more challenging. The heavy reliance of Nigeria’s power sector on gas and the issues affecting the regular gas supply to the generation plants represent an additional challenge.

Plans and Potential

In order to bring a solution to this problem, the Government, in its Power Sector Reform Roadmap, sets the ambitious targets to increase installed hydro to 5,690MW, thermal over 20,000 MW, 1000 MW of renewable generation capacities by 2020. The targets also aim at diversifying Nigeria’s energy mix to reduce its gas dependence.

As an emergency solution, many Electricity Distribution Companies (through Independent Power Producers – IPPs) and States are currently investing in embedded generation (medium scale generation, generally less than 20MW, directly connected to the distribution network). There are 3 licenses for embedded generation with a total installed capacity of 133 MW. Examples are the Eko Electricity Distribution Company that launched a bidding process for several IPP gas power plants below 20 MW or the Sokoto State Government that is in the process of finalizing the construction of a 38 MW diesel power plant (to be then converted into gas). Another example is NESCO, a company based in Plateau that has been operating a small-hydropower plant as an IPP since 1993 and from which the State Government buys electricity in bulk.

Nigeria has vast oil (37.2 billion barrels as of 2012) and gas (5.2 trillion cubic metres as of 2012) resources that could be exploited to increase its generation capacity. As of mid-2014, four thermal power plants were being constructed: Calabar Generation Company Ltd (634 MW), Egbema Generation Company Ltd (381 MW), Gbarain Generation Company Ltd (254 MW) and Omoku Generation Company Ltd (265 MW). Other large gas power plants are being planned such as the 459 MW Azura Edo IPP or the 533 MW Qua Iboe IPP (QIPP) projects. Nigeria also envisages the use of its coal reserves to produce power. The country also aspires to generate power from nuclear.

As shown in the table below, in addition, the country is endowed with vast renewable energy wealth which the authorities also intend to utilize for generation purposes.

Figure 8: Renewable energy potential in Nigeria

Source: ECN and UNDP, November 2012, Renewable Energy Master Plan
A 10 MW pilot wind plant has been built in Katsina and is awaiting commissioning. One major hydropower plant is now under development, the Zungeru 700 MW plant in Niger State. A number of smaller hydropower plants are also being planned such as Gurara (30 MW) or Kashimbilla (40 MW). The 3,050 MW Mambilla hydropower plant project is currently being reviewed. In addition, NERC has issued licenses for 8 solar projects totaling a capacity of 868 MW and a 100 MW wind park. There are many prospectors interested in developing large solar plants.

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Transmission and distribution network

State

The National grid has an installed capacity of 5,758 MW, but its effective wheeling capacity lies at about 4,500 MW. The transmission network has a total length of 12,300 km (330 kV 5,650 km, 132 kV 6.687 km) and connects 32 330 kV and 105 132 kV substations. It is owned by the Government and managed by Transmission Company of Nigeria (TCN). Manitoba Hydro International (MHI) has been contracted to operate it.

The distribution network has a length of 224,838 km (taking into consideration 33KV, 11KV and LV lines overhead and cables). As part of the power sector reform, the network was split into 11 distribution zones, each of them now owned and managed by a different Electricity Distribution Company (DisCo), with the exception of the Kaduna DisCo region whose privatization process is still ongoing.

Ikeja is the one with the longest grid (36,585 km), while Kano is the one with the shortest (7,404 km) and the highest losses (40%). The Ibadan network is the one with the highest capacity (878 MW) and highest number of customers (812,000 customers), while Ikeja is the one with the highest peak demand (1,400 MW) due to the high concentration of economic activities in Lagos.

Figure 9: Electricity Distribution Companies and the state of their network

Source: Wale Shonibare, January 2014, Meeting and sustaining the funding needs for the power sector, UBA Capital Plc; Power Magazine, August-October 2013, Privatizing Nigeria’s Power Utilities, p. 68 and Global Energy Network Institute, Downloaded in January 2014, www.geni.org/globalenergy/library/national_energy_grid/nigeria/nigeriannationalelectricitygrid.sht

At the end of 2014, there also were 138 companies with licenses as metering service providers; of which, 5 certified as meter manufacturers; 13 companies as importers, 28 companies as meter vendors, 13 companies as individual meter installers and 79 as corporate installers.

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Challenges

Due to poor maintenance and vandalization, the transmission network is currently overloaded and experiences losses of 25%, which are particularly high in the north. The radial network is unreliable and contributes to a high number of system collapses. The distribution grid also suffers from high technical and non-technical losses, a poor maintenance regime which is further aggravated by the fact that there is not centralized and automatized control system and low fee collection efficiency which results directly from the low number of installed metering systems are the main problems on the distribution level.

Nigeria’s average electricity consumption per inhabitant is only 150 kWh per capita, one of the lowest in the world. It is estimated that, in 2011, grid-connected customers suffered an average of 28 blackouts per day. Regular brown-outs also make necessary the use of stabilizers in order to protect the electronic equipment.

This situation does not only affect the population’s living standards, but it is also often mentioned as the biggest barrier to the country’s economic development. The closure of industries such as textile factories in the 1990s in states like Kaduna, Kano or Lagos is often cited as a proof of the effect of de-industrialization caused by an unstable power network. The Council for Renewable Energy of Nigeria (CREN) estimated in 2009 that power outages brought an annual loss of about 126 billion naira (US$ 984.38 million). Additionally, Nigeria remains one of the most difficult countries when it comes to obtaining an electricity connection with an estimated time duration of 260 days and a cost of 960% of income per capita.
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Plans

A Network Expansion Blueprint was created in 2013 for the transmission framework. The study estimates the need for a capacity of 16,000 MW by 2017. As a result, TCN is currently refurbishing the transmission network and has launched over 165 on-going projects. Several hundreds of projects are already ongoing, including a project to create a super grid of 700 KV all around Nigeria.

The Roadmap for Power Sector Reform also includes targets for the increase in the distribution capacity of 32,774 MW by 2020. While the plans for the realization of the transmission targets are developed on a centralized level at the Transmission Company of Nigeria (TCN), the achievement of distribution capacity targets will require the joint efforts of the 11 distribution companies. Progress made by the distribution company in this regard is the responsibility of the Nigerian Electricity Regulatory Commission which negotiates targets on grid expansion and densification as well as loss reduction on annual basis through the Key Performance Indicators (for more information, please refer to the chapter on regulation)

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Off-grid and self-generation

Electrification trends, particularly for rural remote areas, have not progressed as fast as they were expected. In addition to the high demographic pressure, the strong focus on grid extension of the Federal and State Governments' rural electrification programmes raises substantially the project costs, particularly in low density and remote areas with low consumption and capacity to pay is often mentioned as one of the reasons. This has been further aggravated by high levels of political interference when it comes to the prioritization of areas to be electrified. Intra- and inter-community conflicts have also resulted in delays in the country’s electrification programme.

Recurrent unscheduled blackouts have pushed the population and businesses to invest in self-generation. It is estimated that only 50% of the electricity generated comes from the grid, while the other half is generated from individual power sources, generally small petrol/diesel generators. In 2009, the aggregated capacity of individual power sources from petrol and diesel generators was conservatively estimated at 6000 MW. In 2006, the Federal Capital Territory, Lagos and the South-South and South East, particularly the Niger Delta states (Delta, Bayelsa and Rivers), were the ones with the highest concentration of fuel generators.

Businesses are the ones that have invested the most on self-generation. Actually, there are 20 licenses summing up a total capacity of 305.5 MW for off-grid (self) generation, most of them for industries. There is also one license for off-grid distribution which covers certain areas of Ogun State where the National Grid does not reach.

Off-grid electrification using conventional sources dates back to the 1970s when the Federal Government through its Rural Electrification Programme decided to electrify all Local Government Areas Headquarters that were off-grid with off-grid diesel powered systems.

Renewable energy based off-grid electrification is more recent. In the 1990s, the Energy Commission of Nigeria (ECN) and the former Federal Ministry of Power and Steel pioneered the installation of off-grid PV in Nigeria, including mini-grids and stand-alone systems for residential, irrigation and cooling purposes. More recently, the Rural Electrification Agency (REA) and the Federal Ministry of Environment (FME) have also started developing these projects. Recently, the Federal Ministry of Power also launched the initiative Light-up Rural Nigeria which focusses on solar micro-grids.

Although States’ electrification interventions, focus mainly on grid extension, some have also installed off-grid PV water pumping systems and off-grid PV street lighting. Some of them have implemented some off-grid PV village electrification projects together with the private sector.

From a preliminary survey including 6 companies carried out by the Nigerian Energy Support Programme (NESP) in 2014, all together these companies had installed about 1 MW of off-grid PV combining mini-grids and stand-alone systems. Most of them have been installed for residential or commercial purposes in un-electrified rural areas, but there are also some that have been built in grid connected areas as grid backup systems. Most of the mentioned projects were installed using full grants from international donors or the federal, state and local levels.

Small wind turbines for water pumping have also been installed in some parts of the country for testing. For instance, the Sokoto Energy Research Centre (SERC) installed a turbine in Sayya Gidan Gada Village, Sokoto. SERC, together with the World Bank (WB), ECN and the Sokoto Government, installed a hybrid mini-grid combining 10 kW solar and 2 kW wind in Danjawa Village, Sokoto. Other technologies such as off-grid PV street lighting have also been tested in Danjawa.

There are as well some experiences with regards to small hydropower. One of the main actors in this regard is the United Nations Industrial development Organization (UNIDO) and its International Small Hydropower Regional Centre and to a lesser extent the United Nations Development Programme (UNDP). Examples of projects developed by latter are Evboro II pico-hydropower plant in Edo State, the 70 kW micro-hydropower plant in Osun, installed using NASENI’s local turbine technology, or the 400 kW mini-hydropower plant in Taraba State. All the above mentioned hydropower projects were developed for village electrification with the exception of the last one which will be used for self-generation at a beverage company. Excess power will be sent to the surrounding villages. The Energy Commission of Nigeria has also installed a pico-hydropower pilot project in Nasarawa to test the kinetic turbine technology. With regards to biomass, there is information of a 5 MW biomass powered mini-grid project by UNIDO, but there is no information concerning the current stage of the project.

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Challenges

The self-generation sector using diesel/petrol generator sets is at an advance state of maturity and functions strictly on a commercial basis. On the contrary, due to the low retail prices of diesel and petrol and low levels of end-user awareness, the off-grid renewable energy sector remains in its infancy and nearly completely dependent on grants. Most of the off-grid renewable energy based rural electrification projects have failed due to the lack of sound business models. Systems are normally installed without having carried out a thorough assessment of end-user needs. Systems are generally handed over to beneficiaries for operations and maintenance without prior training. In spite of the high dependence of the off-grid renewable energy sector on public support, the sector’s framework remains unfinished without a rural electrification strategy and plan, tailored fund or a specific regulation.

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Plans

There is strong political commitment from the Federal Authorities through the FMP and the REA as well as from the State Authorities. No concrete electrification roadmap has been developed though. However, initiatives such as Light-up Rural Nigeria launched by the FMP are planning on developing a more than one hundred solar micro-grids over the next years.

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Legislation, policies and regulation

Nigeria’s framework for the on-grid power sector, particularly with regards to the conventional sector, is well consolidated. The policy and regulatory framework on renewable energies has known a lot of progress over the last years. Seemingly, the framework for medium scale interconnected generation (embedded generation) is also being elaborated at a fast pace due to the importance of this aspect for DisCos. On the contrary, most of the documents conforming the one for rural electrification, particularly off-grid, and also energy efficiency still need to be developed or are still in draft form. There is however, a gap between the policy framework and their operationalization through the formulation and effective implementation on plans with a clear roadmap. Below a chart listing all existing legislative, policy and regulatory documents that are then described in more detail in the subsequent subsections:

Figure 10: Pyramid listing the main legislative, policy and regulatory energy sector related documents in Nigeria

Source: Nigerian Energy Support Programme, To be published, The Nigerian Energy Sector - an Overview with a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification

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Legislation

The Constitution of the Federal Republic of Nigeria 1999 (CAP. C23 L.F.N. 2004) gives the National Assembly the power to legislate over the power sector (Part II, Paragraph 13) and the Houses of Assembly of the States over areas not covered by the national grid (Part II, paragraph 14).

The Electricity Power Sector Reform Act (EPSRA) from 2005 is the key legislation that allowed for the ongoing power sector reforms. The Act also makes provision for the creation of key entities in the liberalized power sector like the Nigerian Electricity Regulatory Commission (NERC). It also gives guidance with regards to the issuance of licenses, calculation of tariffs, land access rights etc. It allows for the unbundling of the sector with the creation of Transmission Company of Nigeria and the Nigerian Electricity Bulk Trader (NBET) and makes provisions for the creation of the Rural Electrification Agency, including the Rural Electrification Fund.
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Policies, strategies and plans

Vision 20-2020 of 2009 developed by the National Planning Commission is Nigeria’s long term development strategy was designed to ensure that Nigeria becomes one of the top 20 economies of the world by 2020. It emphasizes the importance of the development of energy infrastructure as a means to attain its final objective. The target of 40,000 MW by 2020 is mentioned in the document.

Envisaged as a medium term plan (2003-2007), the National Economic Empowerment and Development Strategy (NEEDS) was developed by the National Planning Commission approved in 2004 with the ultimate aim of achieving macroeconomic stability and supporting more efficient use of resources for economic growth. As for the vision, the strategy places high priority on the development of the power sector. The basis for the energy sector is the National Energy Policy (NEP) of 2003 developed and implemented by the Energy Commission of Nigeria. It covers all aspects of the energy sector, including renewable energy, energy efficiency and rural electrification, and sets the target of 75% electrification by 2020.

Created by a National Committee, the National Energy Master Plan (NEMP) of 2007 sets the implementation framework of the National Energy Policy. It covers all energy sources, energy utilization, manpower development, energy financing, energy databank and the project cycle (planning, implementation and monitoring and evaluation).

The National Electric Power Policy (NEPP) of 2001 sets the specific framework for the power sector. It was developed and approved by the former Ministry of Power and Steel.

Building on the Electricity Master Plan (EMP) of 2008, EPSRA and Vision 20-2020, the Presidential Taskforce on Power (PTFP) created the Roadmap for Power Sector Reform in 2010 which was reviewed in 2013. It estimates that $3.5 billion will be needed annually in the power sector in the next ten years and also establishes short, medium and long-term milestones in order to achieve this objective. The plan identifies the main barriers affecting progress towards the full liberalization and the reduction in the supply/demand gap of the power sector.

There have been several attempts to create a renewable energy policy and master plans. The latest is theNational 'Renewable Energy and Energy Efficiency Policy (NREEEP) finalized as a draft in 2013. The Nigerian Energy Support Programme helped improve the document and supports the process for its approval. It aims to provide an overarching framework for renewable energy and energy efficiency, thereby functioning as an umbrella policy for the various existing documents and serving as a reference document (anchor) for concrete implementation measures.

The Energy Commission of Nigeria together with the United Nations Development Programme (UNDP) created the Renewable Energy Master Plan (REMP)in 2006, focusing on the use of small scale renewables for rural electrification, regarded as a predecessor of REMP. Also in 2006, the same two actors launched the Renewable Electricity Action Programme (REAP) operationalizing the guidelines. JICA together with the Ministry of Water Resources has created several Hydropower Master Plans (1993, 1995, 2013) and, in 2007, the Solar Energy Master Plan. The National Nigerian Petroleum Corporation (NNPC) also issued in 2007 the National Bio-fuel Policy and Incentives which formulates a biofuel support programme aiming at integrating the agricultural sector of the economy with the downstream petroleum sector.

The Rural Electrification Policy Paper (REPP) created by the Federal Ministry of Power (FMP) and approved in 2009 establishes the framework and objectives for a rural electrification programme. It sets the target of 10% of RE mix by 2025.

The EPSRA gives the mandate to the REA to develop its own Strategy and Implementation Plan (in close collaboration with NERC) and operationalize the Rural Electrification Fund (REF). Both documents are to be submitted to the Minister of Power for approval. A committee gathering the main actors involved in the power sector was established to review the preliminary draft of the Rural Electrification Strategy and Implementation Plan (RESIP) which is expected to establish a clear institutional step-up for the sector and set a roadmap that results in the establishment of an enabling framework. The draft of the strategy is ready and awaiting approval. Seemingly, the draft guidelines to operationalize the Rural Electrification Fund (REF) are alsoready.

In 2012, the FMP in close collaboration with Energy Commission of Nigeria (ECN), Federal Ministry of Environment (FME) and UNDP also created a National Energy Efficiency Policy identifying the main challenges, setting targets and an institutional set-up. The document is still in a draft form.

As part of the Sustainable Energy For All (SE4All) initiative, the Federal Ministry of Power jointly with the ECOWAS Centre for Renewable Energy and Energy Efficiency (ECREEE) and the Nigerian Energy Support Programme (NESP) are in the process of elaborating National Renewable Energy and Energy Efficiency Action Plans.

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Regulation

The Electricity Power Sector Reform Act (EPSRA) exempts from licensing those systems that „generate electricity not exceeding 1 megawatt (MW) in aggregate at a site or an undertaking for distribution for electricity with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, or such other capacity as the Commission (NERC) may determine from time to time, without a licence“ (Part IV Licences and Tariffs, 62.2). In this line, the activity of NERC has focused on establishing a solid regulatory framework covering the systems that require a license.

With regards to the systems requiring licensing, NERC has approved regulations for generation procurement (e.g. NERC, 2014, Generation Procurement Guidelines and NERC, 2012, Generation Procurement Regulation). Seemingly, NERC has also developed regulation for the importation of equipment (NERC, NERC G-0111: Guidelines for Obtaining Clearance Certificate for the importation of generating sets and related matters).

The Regulator also set the Multi-Year Tariff Order (MYTO), which covers a total of 15 years going forward and is reviewed biannually. It also sets a feed-in tariff in order to ensure there are clear rules in the interim market. The latest review (MYTO II) took place in 1 June 2012 and will be valid until 31 May 2017. In addition to thermal generation, the order also covers large and small hydropower as well as wind and solar. This is however an indicative document. The holder of a licence for generation has to negotiate its tariffs with the Nigerian Bulk Electricity Trader (NBET) which is responsible for developing the Power Purchase Agreements.

NERC has also developed a Grid Code for the Nigeria Electricity Transmission System Version 2. It also approved a Distribution Code for the Nigeria Electricity Distribution System Version 1. Although the regulation for conventional generation is well established, the one for interconnected renewables is in the process of being established or mainstreamed into other regulation. In this line, the Codes are now under review in order to adapt it to the interconnection of renewable energies. In line with the MYTO, NERC also negotiates the tariffs of the 11 DISCOs on a case by case basis following the categories mentioned below:

Figure 11: Table containing information on end-user electricity tariffs as per MYTO

Source: Nigerian Electricity Regulatory Commission, 2014, Summary of the MYTO 2 Retail Tariffs

The agreed tariffs are included in a contract with NERC which also features Key Performance Indicators in accordance with NERC, 2009, Reporting Compliance Regulations. This system allows NERC to steer and monitor progress of electrification with a view to ensure the achievement of policy targets.

NERC has also developed a metering code and other related regulation for connection as well as meter reading, billing etc.

In addition, to the regulation relating to the conventional on-grid sector, NERC has also developed regulation for alternative generation and distribution:

• NERC, Regulations for Independent Electricity Distribution Networks: „IEDN“ (2012) covers isolated generation and distribution requiring license in line with Part IV Licences and Tariffs, 62.2.
  

Two documents provide for regulation regarding generation that does not feed into the transmission network: embedded and captive generation for systems with a capacity above 1MW.

• NERC, 2012, Regulations For Embedded Generation: “Embedded Generation or EG” covers the generation of electricity that is directly connected to and evacuated through a distribution system which is connected to a transmission network operated by a System Operations Licensee.
  
• NERC, 2008, Regulation No: NERC-R-0108: “Captive Power Generation” regulates generation of electricity exceeding 1 MW for the purpose of consumption by the generator, and which is consumed by the generator itself, and not sold to a third-party.
  

The draft Rural Electrification Strategy and Implementation Plan of May 2014 gives NERC the mandate to regulate over the rural electrification sector, including systems that do not require a licence. The document states that the sector will be self-regulated via bilateral agreements between system owners and NERC and a template electricity supply contract. It also gives the mandate to NERC to create a tariff methodology, a protocol for the handover of assets in cases where the assets of the rural operator meet the ones of the Electricity Distribution Company. It also gives NERC together with the REA the mandate to develop standards covering several aspects. The mentioned is now being drafted by NERC with the support of the Nigerian Energy Support Programme (NESP).

All the mentioned documents are accompanied by other regulation on health and safety, consumer protection as well as land access rights. In case of hydropower projects, licence applicants also need to get access to water rights for which the Federal Ministry for Water Resources is responsible as mentioned in the Water Resource Act of 1993. A new act is now being developed.

The Commission has also developed regulation to safeguard healthy levels of competition in the liberalized power market(e.g. Market Rules, Reporting Compliance Regulation, Business Rules).

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Environmental Impact Assessment

The Federal Ministry of Environment (FME) is responsible for the Environmental Impact Assessment (EIA) which is implemented in accordance with the Environmental Impact Assessment Act (Decree No. 86) enacted in 1992 and the guidelines promulgated in 1995. All development projects are classified in one of the following three categories based on the guidelines.

Figure 12: Table containing a description of the different categories of EIA depending on size of project and type of power generation technology

Source: JICA, February 2007, The Master Plan Study for Utilization of Solar Energy in the Federal Republic of Nigeria, Final Report, Volume 1, p. 2-10&11

Renewable Energy projects fall under Category 2. However, at the request of the Federal Ministry of Power and Steel in 2005, a new simplified process was created for small pilot projects (Environmental Control Plan).

The regulatory document Requirements for Licences to be granted pursuant to the application for licences (generation, transmission, system operation, distribution and trading) Regulations of 2006 also mentions a simplified procedure replacing the EIA for off-grid and captive generation below 10 MW called Policy for managing effluents and discharges.
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Institutional set-up in the energy sector

Over the years, a myriad of institutions and bodies have been created in Nigeria to deal with the energy sector. This has led to overlapping mandates and regular conflicts amongst the latter adding to the already complex relation between the Federal and State levels and further affecting the much needed coordination in the sector. The Federal Government decided to start a restructuring process in the sector to respond better to the needs of the newly liberalized power sector. This process is expected to improve the institutional coordination and complementarity.

To ensure the sector coordination the Federal Ministry of Power (FMP) established the Inter-Ministerial Committee on Renewable Energy and Energy Efficiency (ICREEE) composed of the key power sector actors. The committee has rather had a limited impact. The Nigerian Energy Support Programme (NESP) has helped the Federal Ministry of Power to re-activate it.

Figure 13: Table indicating the roles played by key each actor in the energy sector Source: Own elaboration

In addition to the Federal Ministry of Power (FMP) that is supposed to be the main actor in the sector responsible for policy formulation, planning, coordination and monitoring, the Presidency also decided to get directly involved in the power sector reform with the creation of the Presidential Action Committee on Power and the Presidential Taskforce on Power (PTFP). The FMP is one of the institutions that is currently undergoing a restructuring process to adapt to the new structure of the liberalized power sector.

The Electricity Power Sector Reform Act (EPSRA) provided for a new institutional set-up for the reformed power sector. It created the Nigerian Electricity Regulatory Commission in charge of regulating the sector (including licensing) and ensuring compliance of actors with market rules. It unbundled the former public utility, Power Holding Company of Nigeria (PHCN). As a result, a number of thermal power generation plants have been privatized (see third table on generation for more information on generation companies). Others are awaiting privatization under the National Independent Power Producer (NIPP) Programme managed by the Niger Delta Power Holding Company Limited (NDPHC). The hydropower plants have been franchised. The transmission sector remains public under the control of the Transmission Company of Nigeria (TCN) managed by a private company (Manitoba Hydro International of Canada). The distribution sector has been completely privatized with the creation of 11 zones that were sold to the private sector in an open competitive bidding process (see fourth table for more information on the electricity distribution companies). With a view to ensure the transition towards a fully privatized power market, the Act also foresaw the creation of the Nigerian Bulk Electricity Trader (NBET) responsible for purchasing electricity from generation companies and selling it to distribution companies.

Due to the heavy reliance of power generation on gas and in order to ensure gas supply to the power generation companies, a Gas Aggregation Company of Nigeria (GACN) was established with the mandate to facilitate natural gas trade between suppliers and purchasers. The Nigerian Gas Company Limited (NGC) was created to transport natural gas through its pipeline network. Figure 14: Structure of the Power Sector Post-Privatization

Source: Nigerian Energy Support Programme, To be published, The Nigerian Energy Sector - an Overview with a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification, p. 50


In order to narrow down the gap between rural and urban electrification, the Electricity Power Sector Reform Act (EPSRA) also created the Rural Electrification Agency (REA), responsible for stimulating rural electrification through various instruments, including subsidization. Nonetheless, as previously said, the REA’s framework has not yet been fully finalized. Awaiting this “paradigm shift”, the REA carries out implementation of “constituency” projects, mostly grid extension, but also off-grid renewable energies, upon requests from communities or political authorities using the monies of the federal executive which are directly allocated to specific projects. Other actors, like the Federal Ministry of Power, the Federal Ministry of Environment or the Energy Commission of Nigeria also carry out constituency projects using off-grid renewable energy systems. The Constitution gives States the power to do generation, transmission and distribution in areas that are not yet covered by the national grid. As a consequence, States and Local Governments also carry out electrification projects, mostly grid extension to rural areas using their own budgets.
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Description of the main national public actors in the energy sector

• The Presidency of the Federal Republic, Presidential Action Committee on Power (PACP), Presidential Taskforce on Power (PTFP): The Presidency created an ad-hoc body under its direct control responsible for steering progress in the context of the Power Sector Reform. The PACP has the mandate to give guidance to the PTFP which is the operational body. Its mandate is to create a Roadmap which ensures the transition towards a fully operational liberalized power sector. The PTFP coordinates, supports and monitors its implementation. The PTFP is also in charge of key short term power infrastructural projects.
  
• National Planning Commission (NPC): Established by the Act 71 of 1993, it is in charge of formulating, coordinating and monitoring the implementation of national development plans and ensuring coordination and monitoring of development efforts by all stakeholders. NPC, together with all the relevant actors, developed Vision 2020 for the energy sector which led to the reform agenda of the sector. The Commission also works very closely with the PTFP.
  
• Bureau of Public Enterprises (BPE): The Bureau Of Public Enterprises (BPE) serves as the secretariat of the National Council on Privatisation (NCP) and is charged with the overall responsibility of implementing the council's policies on privatization and commercialization. In the case of the power sector reform, it was charged with the management of the privatization process of the electricity generation and distribution companies.
  
• Federal Ministry of Power (FMP): Formerly Federal Ministry of Power and Steel, it is in charge of policy formulation and coordination in the power sector, including on renewable energies and energy efficiency. It also supervises a number of agencies/parastatals: Rural Electrification Agency (REA), Electricity Management Services Limited (EMSL), Nigerian Bulk Trading Company, Transmission Company of Nigeria (TCN), National Power Training Institute of Nigeria (NAPTIN) and Niger Delta Power Holding Company (NDPHC). The Ministry heads the Inter-Ministerial Committee on Renewable Energy and Energy Efficiency composed of the NERC, REA, ECN, NNPC and FME (see below for more information on the mentioned actors). The FMP is also directly in charge of inspecting, testing and certifying grid connected generation, transmission and distribution. It is also responsible for the implementation of renewable energy on-grid and off-grid pilot projects such as the 10 MW wind park in Katsina, Mambilla and Zungeru large hydropower projects or the micro-grids developed under the Light-up Rural Nigeria. The liberalization in the power market has resulted in a change in the needs of the sector. As a consequence, the FMP is now undergoing a restructuring process that will allow it to adapt to the new context. In this context, a new department entitled “Renewable and Rural Power Access” was created.
  
• Nigerian Electricity Regulatory Commission (NERC): Established under Part III – Establishment, Functions and Powers of the Nigerian Electricity Regulatory Commission – of the Electricity Power Sector Reform Act. Its mandate is to monitor and regulate the power sector and ensure compliance with market rules and operating guidelines, mainly for interconnected generation, transmission and distribution, but also off-grid and self-generation requiring licensing. The draft RESIP also gives NERC the power to regulate the rural electrification sector, including systems below 1 MW for generation and 100 kW for a distribution undertaking not requiring licensing.
  
• Rural Electrification Agency (REA): Until the creation of the agency, the FMP was directly in charge of the national Rural Electrification Programme which was initiated in the 1970s. Established under Part IX – Rural Electrification Fund – of the Electricity Power Sector Reform Act, the REA is mandated with the overall responsibility of supporting rural electrification, mainly with the mobilization of capital for rural electrification projects. In order to make it easier for the agency to operate, six zonal offices covering the six geopolitical zones in the country have been created. According to the act, the REA is responsible for setting up and administering the Rural Electrification Fund (REF). It is also responsible for Rural Electrification Strategy and Implementation Plan (RESIP), together with NERC and the FMP. Both instruments are under preparation. Meanwhile, the REA focuses on implementing rural electrification projects, mainly grid extension, upon community and political requests using the monies form the federal executive directly allocated to projects.
  
• National Power Training Institute of Nigeria (NAPTIN): Established in 2009 in response to the recommendation of the National Energy Policy Plan (NEPP), the institute took over the seven regional training centres of the defunct, national utility, Power Holding Company of Nigeria (PHCN). It was established in 2009 with the main aim train and coordinate training activities for the power sector personnel.
  
• Electricity Management Services Limited (EMSL): Created in 2013 as one of the successor organizations of PHCN, it has the mandate to provide all ancillary and support services needed to the electricity supply industry (e.g. engineering lab, meter test stations, central store systems, testing and certification of major electrical power equipment, providing standardization in the power industry, achieving the power sector data and information management).
• Nigeria Bulk Electricity Trader (NBET): It is a Federal Government owned public liability company with the Ministry of Finance and the Bureau of Public Enterprises as their main shareholders established by the Electricity Power Sector Reform Act. It is responsible for purchasing electricity from generation companies under long term Power Purchase Agreements (PPAs) and selling it to distribution companies (see table on the distribution grid for more information on DISCOs). NBET’s PPAs are backed by credit enhancement instruments.
  
• Transmission Company of Nigeria (TCN): Established by the Electricity Power Sector reform Act, it is a state entity responsible for the transmission of electricity from power plants to distribution companies, eligible customers and for export. Acts as Transmission Services Provider (TSP), System Operator (SO) and Market Operator (MO). It is managed by Manitoba Hydro International of Canada under a three year management contract.
• Niger Delta Power Holding Company Limited (NDPHC): It serves as administering institution for the contracts, management and operation of the assets developed under the National Independent Power Producers Programme (NIPP). In 2008, a new structure was formulated under NDPHC would manage the construction projects and finally disinvest the projects to private investors. Ten key power plants of the NIPP were chosen to be privatized. This involved the following facilities: Gbarain, Benin, Omotosho, Egbema, Omoku, Geregu, Calabar, Ogorode, Alaoji, and Olorunsogo. The process entered in its final phase in 2013 and has been successfully completed in 2014. The company is also involved in the development and maintenance of hydropower plants.
  
• Federal Ministry of Science and Technology (FMST): It is responsible for facilitating the development and deployment of science, technology and innovation in Nigeria, including in the energy sector. The Chemical Technology and Energy Research (CTER) department is responsible for liaising with other departments of the Ministry as well as with other institutions and bodies concerning the chemical industry and the energy sector. Another core mandate is to provide R&D support for improved energy generation, transmission, distribution and utilization. The Energy Commission of Nigeria (ECN) is amongst the parastatals it supervises.
• Energy Commission of Nigeria (ECN): Created in 1979 by an act, it commenced its operations in 1989 following the decision of ECOWAS that each member state should create a body called Energy Commission with the main responsibility to coordinate and supervise all energy functions. The ECN serves strategic planning and coordination body of national energy policies and master plans. The ECN has for example drafted the National Energy Policy of 2003 or the Renewable Energy Master Plan together with UNDP in 2005 revised in 2012 (awaiting approval). The ECN is also in charge of six Energy Research Centres with specific technical/research roles. The National Centre for Energy Research and Development (NCERD) at the University of Nigeria in Nsukka; Sokoto Energy Research Centre (SERC) at Usmanu Danfodiyo University in Sokoto; National Centre for Energy Efficiency and Conservation at the University of Lagos; National Centre for Energy and Environment (NCEE) at the University of Benin; National Centre for Petroleum Research and Development at the Abubakar Tafawa Balewa University in Bauchi.
• National Agency for Science and Engineering Infrastructure (NASENI): Established in 1992 following the recommendations of a White Paper Committee on Engineering Infrastructure under the FMST, the agency is in charge of establishing and nurturing an appropriate and dynamic Science and Engineering Infrastructure in the area of capital good research, production and reverse engineering including for power equipment. The key achievements of the agency in this regard are the establishment of an assembly plant for PV with an annual production capacity of 7.5 MW; the local manufacture of Small Hydropower turbines, wind turbines and pole mounted transformers.
• Federal Ministry of Environment (FME): Established in 1999 with the statutory responsibility to coordinate and formulate and direct policies that aim at protecting the natural environment against pollution and degradation and conservation of natural resources for sustainable development in Nigeria. One of its main roles is to develop the procedures for Environmental Impact Assessments (EIA) of all development projects in accordance with the provisions of the EIA Act. No. 86 of 1992.
• National Environmental Standards and Regulations Enforcement Agency (NESREA): Established by the NESREA act of 2007 under the FME, the agency is in charge of enforcing all environmental laws, guidelines, policies, standards and regulations as well as compliance with international environmental law. The agency has so far designed 11 regulations on environmental guidelines and regulations which also cover energy efficiency.
  
• Federal Ministry of Water Resources (FMWR): It was separated from Agriculture in 2010, with the mandate to formulate policies, coordinate with other actors (e.g. FMP when it comes to hydropower), plan the development of the water network, data collection and monitoring. The Ministry is involved in hydropower through its Department of Dams and Reservoir Operations. The Ministry supervises 5 parastatals, amongst which the Nigeria Hydrological Services Agency (NIHSA) with the main mandate to collect data on water resources. The FMWR also supervises the activity of the River Basin Development Authorities (RBDA), the National Water Research Institute as well as the State Ministries for Water resources and water boards.
  
• Standard Organization of Nigeria (SON): It is supervised by the Federal Ministry of Industry, Trade and Investment (FMITI). It was created by the Act 56 of 1971. Its mandate is to develop and ensure compliance with standards. It plays an important role when it comes to the development of standards for Energy Efficiency (e.g. fridges).
  
• Federal Ministry of Lands, Housing and Urban development (FMLHUD): The Ministry was established in 2010 with the mandate to articulate and implement policies and programmes aimed at reducing the housing deficit. The Ministry plays an important role with regards to energy efficiency (e.g. eco-building) and renewable energy home systems.
  
• Nigerian National Petroleum Corporation (NNPC): Established in 1977, its mandate is to regulate and supervise the industry on behalf of the Federal Government. It also has the sole responsibility for upstream and downstream developments. The Corporation has also created a Renewable Energy Division which resulted in the initialization of aa programme on Biofuels (bio-ethanol and –diesel) that can be blended with petrol or diesel. The programme is developed in partnership with the ECN and the Ministry of Agriculture.
• Gas Aggregation Company of Nigeria (GACN): Established in 2010 to manage the implementation of the domestic gas supply obligation regulations. It acts as the facilitator between suppliers and purchasers of natural gas.
  
• Nigerian Gas Company Limited (NGC): One of the subsidiaries of Nigerian National Petroleum Corporation. It is responsible for the transportation of natural gas through its pipeline network.
  

Activities of other donors and implementing agencies

Due to the emphasis that the Nigerian authorities have put on energy, particularly power. There are many donors that are currently active in the sector.

• European Union and EU Member States: An example of the EU’s involvement in the energy sector is Energising Access to Sustainable Energy (EASE) which supports renewable energy, energy efficiency and rural electrification through the Nigerian Energy Support Programme (also funded by Germany and implemented by GIZ). EASE also addresses massive deforestation and access to clean cookstoves in Katsina State and gas flaring reduction in the South. Other EU member states involved in the power sector are the UK through its Department for International Development which established the Nigerian Infrastructure Advisory Facility (NIAF) and Solar Nigeria both programmes implemented by Adam Smith International which work on the power sector reform and also in the provision of access to clean technologies such as off-grid renewable energy systems and improved cookstoves. France through the Agence Française de Développement and PROPARCO that work on access to finance for renewable energies, training for the power sector staff and support to TCN. Sweden and Norway (not an EU member) have also supported the power sector reform.
  
• World Bank and other international financial institutions: They are one of the biggest and longest lasting players in Nigeria’s energy sector. They are strongly involved in the power sector reform and support the construction of new generation and distribution via on-grid and off-grid conventional (including gas flaring reduction) and renewable energies. They are also supporting the federal government and DISCOs with electrification planning. Other financial organizations such as the International Bank for Reconstruction and Development, the African Development Bank and the International Finance Corporation are also involved in the power sector reform.
• United States Agency for International Development (USAID): They currently have several projects in Nigeria covering various aspects such renewable energy (large scale and decentralized) and conventional energy sources through for example the Power Africa Initiative and the Nigeria Energy and Climate Change (NECC). They also cover finance for the private sector and skills development through the Renewable Energy And Energy Efficiency Project (REEEP) implemented by Winrock International.
• Japanese International Cooperation Agency (JICA): JICA has played an important role in the development of hydrological master plans, including the identification of possible hydropower sites. The Agency has also developed a solar energy master plan. It has also supported the development of renewable energy infrastructure in the country.
• United Nations (UN): UN Development Programme (UNDP) through the Global Environment Fund, UN’s Children’s Fund (UNICEF) or UN Industrial Development Organization (UNIDO): The UN is involved in small scale renewable energy (solar home systems and clean cookstoves) and energy efficiency projects through its various agencies. For instance, UNIDO is strongly involved in small hydropower development with the establishment of the Regional Centre for Small Hydro Power and the support to the development of several small hydropower projects.

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References