The ownership structure in the Nigerian Electricity Supply Industry (NESI) is a combination of private investor ownership and state ownership under the Public Enterprises (First Schedule of Privatisation and Commercialisation) Act, Section 1(1). Generation and distribution are handled by licensed private companies through the generation companies (“GenCos”) and distribution companies (“DisCos”) respectively, although the federal government has a stake in these companies. In practice, transmission is handled by the federal government through the Transmission Company of Nigeria (TCN). However, Section 65 of the Electric Power Sector Reform Act allows the Nigerian Electricity Regulatory Commission to issue transmission licences.

GenCos

There are currently a total of 25 GenCos and they comprise the privatised GenCos, independent power producers (IPPs) and the generating stations under the National Integrated Power Project (NIPP), developed by the Niger Delta Power Holding Company of Nigeria. The privatised GenCos are Afam Power; Sapele Power; Egbin Power; Ughelli Power; Kainji Power Plant; Jebba Power Plant; and Shiroro Power.

The IPP plants, which are either 100% privately owned or under long-term concession, are the Shell-operated Afam VI (642MW); the Agip-operated Okpai (480MW); Ibom Power; NESCO and AES Barges (270MW); Aba Power Plant owned by Geometric Power Limited; Geregu One power plant acquired by Amperion Power and Olorunsogo One power plant acquired by Pacific Holdings; Azura Power Station; and Rivers IPP and Ugheli Power Plant managed by Transcorp.

The NIPP power stations, which have already been privatised or have privatisation plans underway, are Alaoji (1,074MW in Abia State; Benin (Ihovbor) (451MW) in Edo State; Calabar (563MW) in Cross River State; Egbema (338MW) in Imo State; Gbarain (225MW) in Bayelsa State; Geregu (434MW) in Kogi State; Olorunsogo in Ogun State; Omotosho (451MW) in Ondo State; Omoku (225MW) in Rivers State; and Sapele (Ogorode).

DisCos

The TCN manages the electricity transmission network in the country and is still fully owned by the government. 

There are 11 DisCos, which are: Port-Harcourt Electricity Distribution Co; Abuja Electricity Distribution Co; Benin Electricity Distribution Co; Ibadan Electricity Distribution Co; Ikeja Electricity Distribution Co; Eko Electricity Distribution Co; Yola Electricity Distribution Co; Jos Electricity Distribution Co; Kano Electricity Distribution Co; Kaduna Electricity Distribution Co; and Enugu Electricity Distribution Co. The DisCos are mainly privately owned, with the government holding minority shares.

Principal Laws

The principal laws governing ownership and structure of the power sector include the following.

• The Constitution of the Federal Republic of Nigeria 1999 (as amended) in Part II of the 1st Schedule listed electricity generation, transmission and distribution on the Concurrent Legislative List, thereby bringing power generation within the competence of the federal government and the federating units.
• The Electric Power Sector Reform Act 2005 is the main legislation governing the development, financing, operation and selling of power in Nigeria. Every aspect of the NESI is governed by the Electric Power Sector Reform Act 2005 (the "Act"). The Act liberalised the power sector by allowing private sector participation in the entire value chain of electricity generation, distribution and allied services. It unbundled the National Electric Power Authority (NEPA) into 18 companies – six GenCos, one transmission company (TCN) and 11 DisCos. The Act further provides for the development of competitive electricity markets and established the Nigerian Electricity Regulatory Commission (NERC) to regulate the power sector and the Rural Electrification Agency (REA) to promote and develop rural electrification.
• The Energy Commission of Nigeria Act established the Energy Commission of Nigeria (ECN) with a mandate to co-ordinate the systematic development of the various energy sources of Nigeria, including renewable energy.
• There are several other relevant regulations, codes and guidelines that relate to the financing, pricing, selling and marketing of power in Nigeria, such as the Feed-in Tariff Regulations; Business Rules of 2006; Market Rules of 2014; and the Bulk Generation Procurement Guidelines and Codes, Version 01.

In Nigeria, there are 11 DisCos, six primary GenCos, and the TCN.

The principal investor-owned companies in the power sector are the GenCos and the DisCos, as the federal government has divested all its interests in the companies to private operators. The TCN, however, is the government-owned company that is solely responsible for the transmission of power.

Under the generation sub-sector, there are privatised GenCos, IPPs and generating stations under the NIPP. The IPP plants are either 100% privately owned or under long-term concession.

See 1.1 Principal Laws Governing the Structure and Ownership of the Power Industry.

There does not appear to be any specific regulation on foreign investment in the power industry in Nigeria. Regulation 3 of the Regulations on National Content Development for the Power Sector, 2014 encourages the participation of indigenous people in the power sector but does not prohibit foreign investment.

In this regard, foreign investment can be achieved either through foreign direct investment or foreign portfolio investment by following the requirements of Chapter 3 of the Companies and Allied Matters Act 2020 in relation to foreign companies, and Section 21 of the Nigerian Investment Promotion Commission Act LFN 2004.

Restrictions/Limitations

Local content

The Regulations on National Content Development for the Power Sector, 2014 place restrictions on the importation of equipment. These regulations provide that all holders of a licence issued under the Act must ensure that first consideration is given to qualified Nigerian companies for the supply of goods and works, and for the provision of services. Also, Regulation 9(a) provides that consideration is to be given first to goods made in Nigeria and services rendered by Nigerian firms in the awarding of contracts.

Where, however, such goods or equipment are not available in Nigeria, they may be imported with payment of the necessary import duties.

For the award of contracts and to secure employment in the sector, priority should be given to Nigerians. However, there is the provision of a waiver where necessary.

Importation and repatriation of capital

Another area of restriction is in respect of capital importation and capital repatriation. Capital must be imported using an authorised agent licensed by the Central Bank of Nigeria. Also, due process must be followed in taking capital out of Nigeria.

Property rights

Nigerian law protects the rights of citizens and indeed juristic persons such as companies to acquire and own property (assets) anywhere in Nigeria. Such properties cannot be confiscated unless in compliance with the orders of a court of law, after legal process has been followed. Properties may also be compulsorily acquired by the state in the public interest, provided that adequate compensation is made to the owner of such property. 

Section 25 of the Nigerian Investment Promotion Commission (NIPC) Act guarantees that foreigners can freely invest in Nigeria and such investments are preserved from expropriation or compulsory acquisition by any government of the federation, except when such acquisition is in the national interest or for a public purpose and under a law which makes provision for (a) payment of fair and adequate compensation, and (b) a right of access to the courts for the determination of the investor’s interest or right and the amount of compensation to which the investor is entitled.

Access to domestic courts is a constitutionally guaranteed right under Section 6(6b) of the Constitution of the Federal Republic of Nigeria 1999 (as amended), where it is stated that the judicial powers of the court will extend to all matters between persons, or between the government or authorities and any persons in Nigeria, and to all actions and proceedings relating thereto, for the determination of any question regarding the civil rights and obligations of that person. This provision vests in any person the right to approach the court for the resolution of any dispute.

Submission of disputes to international arbitration and applicability of international law is not prohibited, provided that the same is agreed by parties in their contracts.

Incentives

Several incentives are provided in various Nigerian tax laws that are also applicable to investments in the power sector, such as, under the Nigerian Investment Promotion Commission Act, Cap N117 LFN 2004 and pioneer status under the Industrial Development (Income Tax Relief) Act, Cap I7 LFN 2004. A pioneer certification exempts qualifying companies from payment of income taxes for a period not exceeding five years. It also grants accelerated capital allowances after the expiration of the tax holiday and tax-exempt dividends, among others.

In 2015, NERC issued the Regulations on Feed-in Tariff for Renewable Energy-Sourced Electricity in Nigeria 2015. These regulations are aimed at stimulating investment in the renewable energy/alternative energy sector of the country with a target of 2,000MW from renewable sources such as biomass, small hydro, wind and solar by 2020. Unfortunately, this target is yet to be reached, as it was recently reported in June 2022 that the federal government and some state governments are still working to produce 2,000 MW of off-grid electricity through solar energy. Some of the objectives of the regulations include establishing a guaranteed price for electricity generated from renewables for a fixed period that guarantees an adequate return on investment, as well as establishing an obligation to purchase power generated from qualifying renewable energy sources. In effect, the regulations, in Chapter 2 Regulation 5f, place an obligation on the DisCos to source a minimum of 50% of their total procurement from renewable, while the remaining 50% is to be sourced from Nigerian Bulk Electricity Trading  (NBET) Plc.

There are no sector-specific laws dealing with the sale or transfer of power assets. Any such sale or transfer is subject to regular Nigerian laws governing such transactions, such as the Companies and Allied Matters Act, the Investment and Securities Act, the Infrastructure Concession Regulatory Commission Act, etc. Furthermore, Section 69 of the Electric Power Sector Reform Act prohibits the transfer or assignment of power assets and licences without the consent of NERC.

The NERC Order on the procedure for obtaining the approval of the commission for the assignment/ceding of a licence, transfer of undertaking or change in shareholding of licensed entities was issued in September 2013 pursuant to Section 69 of the Electric Power Sector Reform Act  (EPSRA) and regulates the transfer of assets or interest in assets in the NESI. 

The principal laws that govern the sale of generation, transmission and distribution assets, and the amalgamation or merger of power industry entities are as follows:

• the Companies and Allied Matters Act; 
• the Investment and Securities Act;
• the Infrastructure Concession Regulatory Commission Act; 
• the Electric Power Sector Reform Act; and
• the Investment and Securities Act.

Regulators

NERC

Section 69 (1) of the EPSRA provides that a licensee may not assign or cede their licence or transfer their undertaking or any part thereof, by way of sale, mortgage, lease, exchange or otherwise, without the prior consent of NERC.

The NERC Order on the Procedure for Obtaining the Approval of the Commission for the Assignment/Ceding of a Licence, Transfer of Undertaking or Change in Shareholding of Licensed Entities therefore sets out the procedure for the transfer of a licence, an assignment/ceding of undertakings of a licensee, or any change in shareholding of a licensee. 

For any of the applications, an applicant is to submit an application to NERC for approval, supported by the following accompanying documents stipulated in Appendix 1 of the NERC Order. 

• Two board resolutions – one from the board of the licensee authorising the transfer or assignment of the licence and one from the board of the new owner accepting the said transfer. 
• An undertaking by the directors of the new owner against service disruption to honour all existing contracts executed by the licensee.
• A certificate of incorporation of the new owner if it is a corporate entity.
• A profile of the new owner and its directors, highlighting their experience in the Nigeria Electricity Market. 
• Proposed changes to senior management.
• An executed copy of the agreement for transfer or assignment of the licence.
• An application for amendment of the licence.
• Payment of processing fees for amendment of the licence.

The licensee must also submit an application for a licence form duly completed by the new owner, ensure that all outstanding debt owed to NERC is settled, and pay all relevant fees in connection with the application. NERC will thereafter conduct legal due diligence on the transferee/assignee/new shareholder. Where this is successful, NERC will grant its approval of the transaction. The timeline for the completion of the application is between three and six months. NERC typically requires that the purchaser of assets or an acquirer of a licensee must have sufficient technical and financial capability to participate in the NESI. There are no stated thresholds used in determining whether a purchaser or an acquirer is technically or financially capable to participate in the NESI. NERC’s decision in this regard is subject to its discretion.

SEC

Any merger, acquisition, or external restructuring transaction between or among companies, involving assets or turnover above NGN500 million requires the prior review and approval of the SEC (the apex regulatory body in Nigeria for the regulation of capital markets, mergers, acquisitions and other forms of business combinations). 

The procedure for application is: 

• submission of the relevant documents to the office of the director general of the SEC;
• review of the documents and communication of deficiencies (if any) to the applicant; 
• where deficiencies are communicated, the timeline for granting approval resets; and
• in the absence of any deficiency, approval is granted and this is communicated to the applicant. 

The process typically takes between three and six months.

The central authority with the responsibility of overseeing the NESI is NERC. Its main role is to issue licences and to regulate persons engaged in the generation, transmission, system operation, distribution and trading of electricity in Nigeria, as well as to preserve efficient industry and market structures in the electricity sector.

With respect to transmission, the TCN is solely responsible for purchasing generated power from the GenCos and selling this to the DisCos. Transmission grids and facilities are fully operated and maintained by the TCN.

It is within the scope of NERC’s functions, as contained in Section 32 of the EPSRA, to ensure that there is electricity supply adequacy, generation planning and development. 

Pursuant to Section 96 of the EPSRA, NERC made a Meter Asset Provider and National Mass Metering Regulations which commenced on 9 August 2021. The objective of the regulations is to provide guidelines for the provision of meters to customers of successor electricity distribution licensees.

Some time in April 2021, NERC issued a tool named the "NERC distribution usage fee tool". The essence of the tool is to form a basis for negotiation on suitable usage fees between distribution companies and mini-grid operators in Nigeria, when a mini-grid operator is utilising the assets of a distribution company at the location of a mini-grid.

Pursuant to Section 76 of the EPSR Act 2005, NERC has the power to establish a methodology for determining electricity tariffs in the NESI and subsequently issue a tariff order called the Multi-Year Tariff Order (MYTO) that sets out tariffs for the generation, transmission and distribution of electricity in Nigeria. In April 2021, NERC issued a Mini Grid MYTO Model 2021. The MYTO is a tariff model for incentive-based regulation that seeks to reward performance above certain benchmarks, reduce technical and non-technical/commercial losses and lead to cost recovery and improved performance standards from all industry operators in the NESI. The purpose of   the MYTO is to set cost-reflective tariffs which will allow  the power sector to be properly funded and functional. It provides a 15-year tariff path for the NESI with limited minor reviews each year in the light of changes in a limited number of parameters (such as inflation, interest rates, exchange rates and generation capacity) and major reviews every five years, when all of the inputs are reviewed with stakeholders.

The Electric Power Sector Reform Act 2005 continues to be the primary legislation, however, regulating electricity power generation, transmission and distribution in Nigeria.

There does not presently appear to be any other new policy that will result in material changes to the power industry except for the Electric Power Sector Reform Act (Amendment) Bill 2019 which is still pending before the National Assembly.

One unique aspect of the NESI is the sole-transmitter model, where the TCN is solely responsible for transmission of all generated power to the DisCos. Another unique aspect is the single-buyer model, where NBET buys up all generated power and sells it to the DisCos. This model ensures regular supply and demand of power in the NESI.

The structure of the NESI wholesale market is progressively competitive, currently based on the single-buyer model co-ordinated by NBET. NBET buys up the power generated by the GenCos and sells this to the DisCos, who sell to the final consumers.

EPSRA Regulations

Section 68 of the EPSRA regulations provides for the granting of trading licences for purchasing, selling and trading electricity. The EPSRA also provides for the granting of temporary licensing for bulk purchasers who have the right to purchase power and other related services from GenCos and IPPs, and to resell these to DisCos and other eligible customers. 

Role of the Power Purchase Agreements

The wholesale electricity market has been designed around NBET as the bulk purchaser. NBET has entered into several power purchase agreements (PPAs) with GenCos and IPPs for generated energy. NBET has also entered into energy-only PPAs. Although this latter type of PPA includes a capacity component, the payments made are equivalent to the energy generated. The result is that the NESI consists of two types of PPAs. The price of wholesale electricity is largely determined by the PPAs on a GenCo-by-GenCo basis. Although NERC issues tariffs to the GenCos, these form the baseline for the GenCos’ tariffs and do not indicate the actual cost of wholesale electricity. These rates are reviewed periodically, taking into consideration the prevailing exchange rate, the rate of inflation and the current price of gas. Consequently, the price of power generated varies from GenCo to GenCo. 

Sale of Electricity

The NBET, after purchasing power from the GenCos and IPPs, sells this to the DisCos in line with the MYTO for the respective DisCos, which sets out the tariff applicable to each DisCo.

Nigeria exports power to some African countries such as Niger, Togo and the Benin Republic under bilateral trade agreements. Presently, Nigeria does not import power from any country. Nigeria is also a member of the West African Power Pool (WAPP), an agency of the Economic Community of West African States (ECOWAS), under which arrangement it trades electricity with some ECOWAS countries.

The GenCos operate either hydro-electric or thermal gas-fired power plants. The installed capacity of hydro-electric power in Nigeria is 1,938.4 MW with an available capacity of 1,060 MW, while thermal gas-fired plants have a total installed capacity of 8,457.6 MW with an available capacity of 4,996 MW. In the area of renewable energy, NERC issued the Regulations on Feed-in Tariffs for Renewable Energy Sourced Electricity in Nigeria 2015. These regulations are aimed at stimulating investment in the renewable energy sector of the country with a target of 2,000 MW from renewable sources, such as biomass, small hydro, wind and solar, by 2020. Some of the objectives of the regulations include establishing a guaranteed price for electricity generated from renewables for a fixed period of time that guarantees adequate return on investment, as well as establishing an obligation to purchase power generated from qualifying renewable energy sources. In effect, the regulations placed an obligation on the DisCos to source a minimum of 50% of their total procurement from renewable, while the remaining 50% was to be sourced from NBET. It is, however, regrettable that at present the 2020 target is yet to be met.

There are no specific laws governing market concentration limits in the NESI. Under the EPSRA, NERC can enforce competition in the electricity sector at different stages of the NESI. NERC is also responsible for ensuring that the abuse of market power is prevented or mitigated, and it may conduct investigations, undertake inquiries or monitor licensees for this purpose. NERC can also impose penalties and fines, and make any other orders consistent with discharging its role as a regulator of the power industry in Nigeria.

The EPSRA generally regulates all activities in the NESI, while NERC is the primary regulator and is charged with the responsibility of ensuring a competitive NESI. In addition, the Federal Competition and Consumer Protection Commission (FCCPC), pursuant to the Federal Competition and Consumer Protection Commission Act 2018, is the primary agency of government for ensuring and enforcing a competitive market in all sectors of the economy as well as monitoring and curtailing anti-competitive practices by big players. The FCCPC is empowered to conduct investigations; issue summons to appear and produce documents to companies under investigation; enter into, search and seize valuable documents and materials, including electronic devices; and sanction any anti-competitive or monopolistic activity by companies, among other functions. The FCCPC also has prosecutorial powers and may prosecute defaulting companies accordingly. Punishment for breaches of the provisions of the FCCPC Act range from fines to imprisonment or both.

In Nigeria the major law governing climate change is the Climate Change Act, 2021. This Act provides a framework for mainstreaming climate change actions, provides for a system of carbon budgeting and provides for the establishment of the National Council on Climate Change. Other relevant legislations/policies include:

• the National Policy on Climate Change;
• UN Framework Convention on Climate Change;
• the Environmental Impact Assessment (EIA) Act, Cap E12 LFN 2004;
• the National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007;
• the National Environmental Standards and Regulations Enforcement Agency (NESREA);
• the National Adaptation Strategy and Plan of Action on Climate Change for Nigeria;
• the Climate Policy Database;
• the NESREA National Policy on Environment;
• the NESREA Draft Objectives and Strategies for Nigeria’s Agenda;
• the WHO Country Planning Cycle Database; and
• the Flare Gas (Prevention of Waste and Pollution) Regulations, 2018.

In relation to the power industry, the Climate Change Act provides that a National Climate Change Action Plan be formulated by the Secretariat (the Administrative Arm of the National Council on Climate Change) in consultation with the federal ministries responsible for environment, budget and national planning, every five-year cycle. The said Action Plan will prescribe the measures and mechanisms to enhance energy conservation, efficiency, and the use of renewable energy in the industrial, commercial, transport, domestic and other sectors.

On how laws/policies are directed to limit carbon emission, the Climate Change Act provides that the National Council on Climate Change (the "Council”) is to collaborate with the federal ministries responsible for environment and trade, to develop and implement a mechanism for carbon emission trading. The Council is also to collaborate with the Federal Inland Revenue Service to develop a mechanism for carbon tax in Nigeria. 

The proceeds of emission trading and tax are to be paid into the Climate Change Fund established under the Act. The fund is to be applied to incentivising private and public entities in their efforts towards transiting to clean energy and sustaining a reduction in greenhouse gas emissions, among other purposes.

Concerning emission limits and the mechanism used to limit carbon emissions:

At COP26 in Glasgow, Nigerian President Muhammadu Buhari announced that Nigeria will cut its carbon emissions and reach net-zero by 2060. The president subsequently signed into law a new Climate Act, with a view to achieving net-zero greenhouse gas emissions between 2050 and 2070. The said Act also provides that the Federal Ministry of Environment will, in consultation with the Federal Ministry for National Planning, set a carbon budget for Nigeria, to keep average increases in global temperature within 2°C and pursue efforts to limit the temperature increase to l.5°C above pre-industrial levels. The carbon budget is to be revised periodically in line with Nigeria's nationally determined contributions and with a view to complying with Nigeria's international obligations.

The Nigerian government, through the Department of Climate Change in the Federal Ministry of Environment, developed a 2050 Long Term Vision for Nigeria (LTV2050) towards the development of Nigeria’s long strategy named the Long-Term Low Emissions Development Strategy (LT-LEDS). The vision is that:

“by 2050, Nigeria is a country [with a] low-carbon, climate-resilient, high-growth circular economy that reduces its current level of emissions by 50%, moving towards having net-zero emissions across all sectors of its development in a gender-responsive manner.” 

The retirement of carbon-based generation in Nigeria is gradual and its major drivers are the Climate Change Act and the Nigeria Energy Transition Master Plan (ETP). The Climate Change Act in a bid to achieve its year 2060 net-zero plan has put in place certain structures to encourage the use of clean energy. Some of these initiatives include the design of a National Action Plan, the creation of a carbon budget, and the introduction of a carbon tax and carbon emissions trading system. 

The ETP has adopted a phase-down approach, as opposed to a phase-out approach, in its transition plans. For the oil and gas sector, the plan seeks to reduce emissions as part of the global response to climate change mitigation using technologies such as carbon capture and storage (CCS), direct air capture, hydrogen fuel, etc.

With respect to the power sector, emissions will be reduced via the use of solar energy, as renewables replace natural gas as a transition fuel.

Furthermore, Section 64 (h) of the Petroleum Industry Act (2021) gives the Nigerian National Petroleum Corporation Ltd (NNPC) the responsibility to engage in the business of renewables and other energy investments.

There are however no specific timelines for early retirement of carbon-based energy in Nigeria. The same applies to compensations. 

Attention to developing renewable sources has become stronger and it is gradually becoming the focal point of Nigeria’s electricity policy. Laws, policies and other regulatory instruments geared towards stimulating investment in renewables have been introduced to achieve this goal.

The EPSRA, which primarily regulates Nigeria’s electricity sector, established NERC as the apex regulator of the sector and the REA was charged with the responsibility of expanding the main grid; developing isolated mini-grid systems; and promoting renewable energy power generation. 

The Electricity Bill 2021 (the “Bill”) is currently pending before the National Assembly. The Bill aims, among other things, to create an enabling environment to attract investment in renewable energy sources, to improve the use of renewable energy off-grid and mini-grid solutions for electrification, and to promote indigenous capacity in technology for renewable energy sources.

Regulations

NERC has issued several regulations to promote the development of alternative energy sources in Nigeria.

• In 2015, the Federal Executive Council approved the National Renewable Energy and Energy Efficiency Policy (NREEEP) to remove barriers that disadvantage renewable energy and energy efficiency, and to provide an environment that is conducive to attracting investment in renewables. As a result of NREEEP, NBET executed PPAs with 14 solar photovoltaic IPP developers, to show the federal government’s intention to invest in renewable energy (however, the project has been delayed).
• NERC also issued the Regulations on Feed-In Tariffs for Renewable Energy-Sourced Electricity in Nigeria (REFIT), which is aimed at promoting investment in renewable energy in Nigeria. The tariff estimates that Nigeria will generate at least 1,000 MW from renewable energy. REFIT expects the DisCos to source at least 50% of their total procurement from renewables and the remaining 50% from NBET.
• The Energizing Economies Initiative, implemented by REA, seeks to increase energy access and economic growth by providing clean, reliable and affordable power to economic clusters across Nigeria, such as markets, shopping complexes and agricultural/industrial clusters. It seeks to promote efficient, clean, safe, cheaper and sustainable power to catchment areas that have a high-growth impact on the economy. 
• In response to COVID-19, the federal government also launched the Solar Power Naija Project in December 2020, aimed at providing five million households with solar home systems for off-grid communities, under the Nigeria Economic Sustainability Plan (NESP).

Other policies include the National Biofuel Policy and Incentives; the Renewable Energy Master Plan, 2005 and 2012; and the National Renewable Energy Action Plan for 2015–30 as adopted by the National Council on Power on 14 July 2016.

Capacity Target

Nigeria’s Renewable Energy Master Plan seeks to increase the supply of renewable electricity from 13% of total electricity generation in 2015 to 23% in 2025 and 36% by 2030. Renewable electricity would then account for 10% of Nigeria's total energy consumption by 2025.

Fiscal Incentives

There is currently no specific competitive procurement process for alternative energy-sourced power generation. 

There are numerous incentives provided in various Nigerian tax laws that are also applicable to investments in renewable energy, such as under the Nigerian Investment Promotion Commission Act, Cap N117 LFN 2004 and the pioneer status under the Industrial Development (Income Tax Relief) Act, Cap I7 LFN 2004. A pioneer certification exempts qualifying companies from payment of income taxes for a period not exceeding five years. It also grants accelerated capital allowances after the expiration of the tax holiday, and tax-exempt dividends, among others.

NERC has stated that the following incentives, among others, will be available to investments in renewable energy:

• grid connection; 
• a simplified licensing procedure for renewable IPPs selling electricity to the grid; 
• facilitation of land acquisition for renewable energy projects; 
• a waiver of licensing for renewable energy plants with less than 1 MW capacity;
• feed-in tariffs for solar, wind, biomass and small hydro plants;
• the obligation of the DisCos to source at least 50% of their total commitments from renewable energy, among others; and
• NBET procurement of a minimum of 1,000 MW of the total projected renewable sourced electricity.

The principal law that governs the construction and operation of generation facilities in Nigeria is the EPSRA. The Act governs the NESI and the NESI value chain (including electricity generation, transmission, distribution, supply and trading). The Act also established NERC, which was saddled with the responsibility of licensing and regulating persons engaged in the generation, transmission, system operation, distribution and trading of electricity. 

Other policies that regulate the construction and operation of generation facilities include:

• NERC Regulations for the Application for Licence (Generation, Transmission, System Operations, Distribution and Trading), 2010; 
• Nigerian Electricity Supply and Installation Standards Regulations, 2015;
• NERC (Permits for Captive Power Generation) Regulations, 2008;
• NERC (Embedded Generation) Regulations, 2012; 
• Electricity Industry (Enforcement) Regulations, 2014; and 
• NERC (Licence and Operating Fees) Regulations, 2010.

The EPSRA provides that no person shall construct, own or operate an undertaking or in any way engage in the business of electricity generation, excluding captive generation, without a licence. 

A person may, however, construct, own or operate an undertaking for generating electricity not exceeding 1 MW in aggregate at a site or in an undertaking for the distribution of electricity with a capacity not exceeding 100 kW in aggregate as a site or such other capacity as NERC may determine from time to time.

Approval to Construct a Generation Facility

Site approval

Before siting and commencement of construction of a power plant, the licensee is mandated to first obtain approval of the site by NERC and other relevant agencies as well as the consent of the host community. 

Every application for generation site approval by a licensee is to be accompanied by a topographic map in 1–10,000 of the project site, a geotechnical investigations report, site layout plan and EIA report. The licensee must submit the following:

• a detailed geo-investigation of the site;
• a detailed hydrological report to indicate that the site will not be subject to seasonal floods;
• a water permit obtained from the Federal Inland Waterways if the water is to be extracted from inland water bodies for water use above 1,000 cubic metres per day; and
• an environmental impact assessment (EIA) statement approved by the Federal Ministry of Environment indicating that all environmental issues likely to arise from the construction of the plant have been addressed, and approval obtained.

Plant design approval

A licensee is expected to submit a detailed engineering design of the power station to NERC based on applicable national and international engineering codes. The design will ensure that when the power plant is built it will be able to generate its design capacity in a cost-effective, reliable and safe manner with minimal impact on the environment.

Permit to construct power plants

Licensees are expected to comply with all sections of the Nigerian building codes and environmental health and safety regulations requirements, and obtain a construction permit from NERC for the commencement of construction of the plant.

Approval to Operate a Generation Facility

Before any person can operate generation facilities in Nigeria, such person must first obtain a generation licence. The NERC Application for Licences Regulations, 2010 provide the documentation and procedure for license applications as follows.

Pre-application stage

The licensee is expected to have carried out pre-application requirements such as registration of a company in Nigeria, possession of a tax clearance certificate evidencing payment of three years of tax immediately before the application, etc.

Application stage

An application for a licence must be made in writing on a specified form and addressed to the chairman of NERC. It must be accompanied by the documents necessary for a generation licence. The applicant must pay a non-refundable fee, as fixed by NERC, for processing the application.

Evaluation stage

The application will be evaluated by three divisions of NERC – the legal licensing and enforcement division, the engineering standards and safety division and the market competition and rates division. The applicant must arrange an EIA of the site as well as an evaluation of how effluents and discharges will be handled. The applicant must have entered an off-take agreement or, where the applicant proposes to supply power to the grid, a PPA will have to be entered with NBET.

Notification and publication of notice stage

NERC will notify the applicant of the completeness of the application within 30 days of passing a resolution to that effect. The applicant will publish a statutory public notice to that effect in at least two daily newspapers, and the notice will state the period within which any objection or representation in connection with the application must be made to the Commission.

Objection and hearing stage

Any person that has an objection to the granting of the licence is expected to file a written objection within 21 days from the date of the public notice. Objections, if any, will be heard by NERC before the granting or refusal of the licence.

Approval or refusal of licence

After due consideration of the application and the inquiry, if any, the Commission will either grant or refuse to grant the licence.

The requisite terms and conditions that must be fulfilled before approval to construct and operate a generation facility are granted are as follows.

Approvals for Construction of Generation Facilities

A licensee constructing a generation plant is required to comply with the conditions in the Nigerian Electricity Supply and Installation Standards Regulations ("NESIS Regulations") 2015, which include:

• the engineering design of the power station must be based on applicable national and international engineering codes;
• the design must ensure that the power plant when built is able to generate its design capacity in a cost-effective, reliable and safe manner with minimal impact on the environment;
• the power plant layout must permit reasonable access for the operation and maintenance of equipment;
• the type of fuel and its availability must be in accordance with environmental regulatory requirements;
• an electric power plant is to be designed with the type of stack-gas cleanup equipment that meets federal (NESREA) and state emission requirements;
• other environmental considerations, such as noise control and aesthetic treatment of the project; and
• construction of the power plant should be in compliance with Nigeria's National Building Code as well as federal, state and local government building and environmental health and safety regulations and procedures.

The terms and conditions of approval to construct a generation facility can only be relaxed (derogated) on the approval of NERC. The NESIS Regulations provide that where a licensee is unable to comply with any of the provisions of the Regulations, such licensee shall comply with the processes for seeking derogation stipulated in the Guidelines on Derogation from Technical Codes and Standards in Electricity Generation, Transmission, Distribution and Supply in Nigeria.

Terms and Conditions for Operation of a Licence

The EPSRA, particularly Section 71, provides that a licence may be subject to certain terms and conditions as may be prescribed or determined by NERC. 

The EPSRA also provides that the terms and conditions of a licence may require the licensee to: 

• enter into agreements on specified terms with other parties for the provision or use of electric lines and other associated equipment operated by the licensee;
• purchase power and other resources in an economical and transparent manner;
• refer disputes for arbitration, mediation or determination by NERC; 
• provide information to NERC on a periodic basis;
• (unless expressly exempted) prepare and submit accounting information for each year to NERC;
• prohibit assignment or transferral of the licence or its generation business to another entity without NERC’s prior written consent;
• prohibit change to the ownership structure, exceeding 5% of authorised share capital, without notifying NERC at least 30 days prior to the proposed changes, and obtaining NERC’s consent to such changes;
• insure all generating station equipment and facilities;
• divest itself of certain shares or adhere to a code of conduct determined to be in the public interest, where a licensee owns more than 10% of the shares in a company, and holds another licence issued by the Commission;
• comply with termination or amendment conditions; and
• restrict generation beyond the capacity for which the licence was issued, and to restrict generation outside the specific site in relation to which the licence was issued.

The licence must contain terms and conditions for the licence to cease to have effect or be modified by the Commission.

A licensee does not have eminent domain or expropriation rights to obtain surface access and use of land in Nigeria. The Constitution of the Federal Republic of Nigeria guarantees a person’s right to own property and also restricts compulsory acquisition of a person’s interest in the property except in exceptional circumstances where the acquisition is for public use. 

All land in each state of Nigeria is vested in the governor of that state, and such land is held in trust and administered for the use and common benefit of all Nigerians in accordance with the provisions of the Land Use Act. The governor of each state has the power to grant right of occupancy to individuals seeking interest in the land. 

NERC (Acquisition of Land and Access Rights for Electricity Projects) Regulations, 2012 make provision for voluntary and compulsory acquisition of land for electricity projects. NERC encourages voluntary acquisition of land for such projects. 

A licensee is expected, prior to embarking on any electricity project on any land not owned by it, to notify the owner of its intention to use the land for the said project and obtain the free fair informed consent of the owner. 

However, compulsory acquisition will be adopted where:

• a licensee is a company wholly or partially owned by a local, state or federal government;
• the project cannot be sited anywhere else apart from on the land which is the subject of the acquisition; 
• the Project Affected Persons (PAP) has withheld or refused to give the licensee free prior informed consent to acquire the land voluntarily; and 
• the Commission has evaluated the application by the licensee and is convinced that the land is necessary for the project and is therefore required by the licensee. 

Where the occupier or landowner fails to give consent within a reasonable period, the licensee may apply to NERC for a declaration that the land is required for the purposes of generation, transmission or distribution of electricity. Upon a declaration by NERC that said land is required by a licensee after the landowner has had the opportunity to make representations against such a declaration, the compulsory acquisition of the land will be carried out in accordance with the provisions of the Land Use Act. By virtue of the Land Use Act, the governor will revoke the right of occupancy upon issue of a notice in the Gazette by or on behalf of the president that such land is required by the government for public purposes. The licensee will thereafter process the acquisition of access rights as stipulated by the Office of the Surveyor-General of the Federation. 

Note that a licensee is expected to compensate landowners or persons affected by the compulsory acquisition of land. 

Besides paragraph 1.5.1 of the Nigerian Electricity Supply and Installation Standards Regulations, 2015 which provides that any licensee that is decommissioning a generation facility is required to comply with the EPSRA, the NESIS and all regulations, codes and standards made pursuant to the EPSRA, there are no specific sector regulations or policies on decommissioning of generation facilities in Nigeria.

Note that the Federal Ministry of Environment developed a guideline to assist facility owners on the appropriate process to follow for successful decommissioning of a facility and rehabilitation of the surrounding environment. 

The purpose of this guideline is to provide clear directions and guidance on the step-by-step process involved in decommissioning a facility in Nigeria. The guideline is applicable to decommissioning generation facilities in Nigeria, since there is a specific provision applicable to the power sector in Nigeria. A licensee is required to comply with these guidelines and any others prescribed by a relevant body from time to time. 

The guidelines provide the following basic requirements for decommissioning: 

• the removal of structures on or beneath the ground;
• the disposal or secure isolation and/or treatment of contaminated equipment on site or off site;
• the remediation of aesthetics (back-fillings, stained soil removal, waste disposals, etc) and containment control of contaminants and general site clean-up; 
• access control for physical structures remaining on site that are unsafe or hazardous to humans or animals; 
• remediation of aesthetically unacceptable portions of the site (filling in of pits, removal of stained soil and odorous material, levelling of mounds, disposal of waste rock, etc);
• a clean-up of the site to a level that will provide long-term environmental protection and be safe for intended future use; and
• submission to the applicable regulatory agency and other required jurisdictions of a report confirming that decommissioning and cleaning up have been completed.