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Comply with Policies and Regulations
Introduction
Nigerian developers working on decentralized renewable electricity solutions for off-grid areas should consider several key aspects of regulations and policies to ensure compliance and the successful implementation of their projects. This page will give an overview of the regulatory landscape and list tools and resources that are of use specifically for developers.
Fundamental remarks
Mini grids
Over the last few years, mini-grids have played a key role in implementing Nigeria’s energy access and sustainable energy goals. They are now widely acknowledged as an integral component of the country’s energy ecosystem, delivering sustainable and reliable electricity access to nearly 27 thousand households living in areas that, until now, were out of reach of or unreliably served by the main grid infrastructure[1].
In 2016, two significant developments took place in the Nigerian energy sector. First, the Rural Electrification Agency (REA) released the Rural Electrification Strategy and Implementation Plan (RESIP), which acknowledged mini-grids’ role in closing the energy access gap and improving supply. In the same year, the Nigerian Electricity Regulatory Commission (NERC) approved comprehensive mini-grid regulation, NERC Regulation for Mini-grids 2016, covering a broad set of issues, from mini-grid licensing to quality standards and tariff design. This regulation has been replaced in 2023 by the NERC Minigrid Regulations 2023. Changes in the Regulations concern: (1) Provision enabling Mini-grid permits for interconnected mini-grid operators, (2) Introduction of portfolio of isolated and interconnected mini-grids, (3) Provision for a submission of individual and combined reports for each mini grid and portfolio of min-grids respectively, (4) Submission of reports on mini-grids at least once in a year, (5) Stringent system for finding discrepancies in inspection of accounts for adjustment of tariffs, (6) Provision of 12-month notification period to isolated mini-grid permit holder for Disco interconnection, (7) Improvement in compensation and transfer of asset process to the Disco during interconnection in return for compensation, (8) Filing of decommissioning plan by the Disco and the registered mini-grid operator, (9) Provision facilitating compensation to interconnected mini-grid operator where Disco reintegrates interconnected mini-grid into its network, (10) Provision to file either a single tariff application for all sites under a portfolio of isolated/interconnected mini-grids or individual application for each site under the two portfolios, (11) Reduction of allowable technical losses and non-technical losses cap for determining retail tariffs from 10% to 4% and 3% respectively [2].
Table 1: Summary of Key Policies Governing Off-grid Sector[3]
| Policy | Agency | Description |
|---|---|---|
| National Renewable Energy and Energy Efficiency Policy (NREEEP) | Federal Ministry of Power | This policy was approved by the Federal Executive Council in 2015 and details the Nigerian government’s blueprint for harnessing the country’s renewable energy resources to drive sustainable development. |
| National Renewable Energy Action Plans (NREAP) | Federal Ministry of Power | This action plan was approved by the National Council on Power (NACOP) in July 2016 and serves to implement the renewable energy component of the 2015 NREEEP. |
| National Energy Efficiency Action Plan (NEEAP) | Federal Ministry of Power | This action plan was approved by NACOP in July 2016 and serves to implement the energy efficiency component of the 2015 NREEEP. |
| Rural Electrification Strategy and Implementation Plan (RESIP) | Federal Ministry of Power/ REA | This strategy and implementation plan was approved in July 2016 and was prepared by the Federal Ministry of Power, Works and Housing (presently Federal Ministry of Power) to be executed by REA. The document was developed in line with FGN’s plan for rural electrification and provides the implementation framework and measures for driving rural electrification across the country using both on and off-grid energy solutions. |
| NERC Mini-Grid Regulations 2016 | NERC | These regulations were released by NERC in May 2017 and are the overarching document governing the development of mini-grid electricity generation (0-100 KW – 1 MW) in Nigeria. The regulation is designed to accelerate the electrification of unserved and underserved areas especially rural and peri-urban communities. It incentivizes and minimizes major risks associated with mini-grid investments and simplifies the process for private sector participation. This document was replaced in 2023 by the NERC Mini Grid Regulations 2023. |
| NERC Mini Grid Regulations 2023 | NERC | |
| Sustainable Energy for All Action Agenda (SE4All-AA), | Federal Ministry of Power | Nigeria’s SE4All Action Agenda was approved by NACOP in July 2016. The key objectives of the SE4All initiatives globally are to ensure universal access to modern energy services, double the global rate of improvement in energy efficiency, and double the share of renewable energy in the global energy mix by 2030. |
| Nationally Determined Contribution (NDC) | Federal Ministry of Environment | Nigeria’s NDCs are its global commitment to sustainable development measures that limit the rate of global warming and negative impacts of climate change. It includes the country’s climate targets and plans to achieve them |
| NERC Eligible Customer Regulations | NERC | The Eligible Customer Regulations were approved in 2017 by NERC and permit electricity companies and Independent Power Producers (IPPs) to by-pass the Bulk Trader (the Nigerian Bulk Electricity Trading Plc (NBET) and DISCOs in order to sell electricity directly to eligible customers. |
| Regulation on National Content Development for the Power Sector | NERC | This regulation was approved by NERC in 2014 and aims to promote the deliberate utilization of local human workforce and material resources across the value chain of the Nigerian Electricity Supply Industry (NESI). |
The Energypedia article Policy and Regulatory Framework for Energy in Nigeria discusses the regulatory landscape in more detail.
Guiding Principles
This subsection will touch on regulations and policies that directly govern the development of minigrids, manufacturing and distribution of SHS, including regulations for consumer payments, and customs and importation duties.
Consumer payments
Nigeria is largely a cash-based economy. In recent years, while mobile payment transactions have become more widely adopted, penetration still remains low. To tackle this issue, the Central Bank of Nigeria (CBN) introduced Payment Service Banks (PSBs) in 2018. These PSBs enable telecom companies to use their extensive networks to offer financial services in underserved areas of Nigeria. While PSBs are relatively new, they hold great promise for off-grid companies looking to simplify payments for their offerings, especially in financially underserved regions[4].
Relevant CBN regulations for consumer payments include:
- Guidelines for the Regulation of Agent Banking and Relationships in Nigeria (2013)
- Regulatory Framework for Mobile Money Services in Nigeria
- Guidelines on Mobile Money Services in Nigeria (2015)
- Consumer Protection Regulations (2019)
- Guidelines for Licensing and Regulation of PSBs (Revised in 2020)
- CBN Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria (TBA)
Customs and importation
The relevant regulations governing the importation of off-grid components and products into Kenya are the Economic Community of West African States (ECOWAS) Common External Tariff (CET) and SON Conformity Assessment Program (SONCAP). Table 2 summarizes the primary customs duties for off-grid components in Nigeria.
| Category | Duty Assessed | For Mini-grids | For SHS |
|---|---|---|---|
| PV Modules | 0% | Yes | |
| PV Systems | 5% | Yes | |
| PV Generator | 5% | Yes | |
| Lithium Batteries | 20% | Yes | |
| Others (SHS) | 5-20% | Yes |
Setting up an off-grid business
According to the Doing Business Report by the World Bank, ease of doing business in Nigeria is low. It holds a score of 56.9, placing it at the 131st position among 190 countries[5]. To tackle this challenge, key regulations pertaining to business establishment and registration in Nigeria are outlined in the Companies and Allied Matters Act of 2020. In August 2020, President Muhammadu Buhari of Nigeria signed into law the Companies and Allied Matters Act 2020 (CAMA 2020)[6], replacing the previous 1990 Act. CAMA 2020 presents a comprehensive framework aimed at addressing burdensome legal, regulatory, and administrative hurdles that have made business operations particularly challenging, especially for MSMEs. Under this Act, the registration of businesses is handled by the Corporate Affairs Commission (CAC) – the government body responsible for providing business registration and regulatory services. Figure 8 illustrates the process for setting up a business in Nigeria.
Figure 1: Business registration process[4]
| 1 | Check for availability of proposed company name. |
| 2 | Complete pre-registration form CAC 1.1 |
| 3 | Pay filing and stamp duty fees. |
| 4 | Prepare the signed scan copy of your pre-registration documents for uploads as follows: Form CAC 1.1 and the Memorandum and Article of Association (MEMART) |
| 5 | Recognized form of identification for Director(s) Subscriber(s) and Secretary |
| 6 | Provide evidence of CAC and upload scanned documents for processing. |
| 7 | Submit the original copies of the documents to the CAC office selected in exchange for your certificate and the Certified True copies of the documents. |
It is important to note the following for Foreign Nationals:
- Foreign nationals not resident in Nigeria do not require permits before establishing a business or investing in Nigeria. However, foreign national’s resident in Nigeria need a residence permit before forming a company.
- Companies intending to use the services of foreign workers need to obtain expatriate quota from the Nigerian Investment Promotion Council.
- Foreign companies intending to do business in Nigeria may apply for exemption from registration especially those undertaking special projects. [4]
Existing Tools and Resources
| Name | Nigeria specific | Open source | Description |
|---|---|---|---|
| Regulations for Mini-Grids 2016, Simplified Summary | Yes | Yes | This Guide provides a simplified summary of the regulation primarily for stakeholders in the off grid renewable energy sector. It further provides some context for the regulation – including the definition and types of mini-grids, process and requirements for permit and licenses, project development processes, tariffs and other charges, relationship between stakeholders, compliance and technical requirements, compensation, dispute resolution and current implementation status. |
| Future-proofing the expanding market: Recommendations for improving the bankability of the mini-grid regulatory framework in Nigeria | Yes | Yes | This position paper aims to discuss further the identified gaps/lack of clarity – regulatory and policy – which are slowing down the scaling of the mini-grid sector in Nigeria and to propose ways for further improvement. It has been developed jointly by key stakeholders – developers, financiers, and industry associations – driving Nigeria's mini-grid sector's growth. |
| Nigeria Electricity Hub: Power Library | Yes | Yes | This online library provides a collection of regulatory documents, policy roadmaps, press releases, reports, research articles, and publications for the renewable power sector in Nigeria. |
| Mini-Grids as Catalyst for Renewable Electricity Access: An Overview of Extant Laws | Yes | Yes | The core of this article is to highlight the role of mini-grids in solving the electricity problems and examine the existing legal framework for the establishment of mini-grids in Nigeria. |
Bibliography
- ↑ REAN (2022) Future-proofing the expanding market: Recommendations for improving the bankability of the mini-grid regulatory framework in Nigeria. Multi-stakeholder position paper. Available at: https://rean.org.ng/wp-content/uploads/2022/12/221220-NG-mini-grid-position-paper-1.pdf
- ↑ Okediya, Peter (2024). The 2023 Mini-Grid Regulations: What’s New, Project Development Procedures and Permit Requirements.https://energybriefbyfortrose.substack.com/p/the-2023-mini-grid-regulations-whats
- ↑ USAID (2021) PA-NPSP Off-Grid Market Intelligence Report. The Nigeria Power Sector Reform Program.
- ↑ 4.0 4.1 4.2 4.3 USAID & Power Africa. (2022). PA NPSP Off-Grid Market Intelligence Report. https://pdf.usaid.gov/pdf_docs/PA00ZB5X.pdf
- ↑ World Bank. (2020). Ease of doing business in Nigeria. https://archive.doingbusiness.org/en/data/exploreeconomies/nigeria
- ↑ Proshare. (2020). The Sea is History – the CAMA 2020 Aspires to Optimize Corporate Regulation. https://www.proshareng.com/news/DOING%20BUSINESS%20IN%20NIGERIA/The-Sea-is-History---the-CAMA-2020-Aspiresto-Optimize-Corporate-Regulation-in-Nigeria/52994
