Nigeria: Ownership Models In Power Sector

Introduction

In recent years, Nigeria’s power sector has undergone a significant shift, from a centralized, government run monopoly to a more open and market-driven structure. This transition was largely motivated by the need for energy security, efficiency and improved service delivery.

Historically, the Federal Government of Nigeria (“FGN”) exercised exclusive control over the generation, transmission, and distribution of electricity managed by the former National Electric Power Authority (“NEPA”) and later the Power Holding Company of Nigeria (“PHCN”). However, persistent inefficiencies, low generation capacity, ageing infrastructure, poor access in rural and semi-urban areas, and rising fiscal burdens made it clear that government monopoly was unsustainable.

In response to these challenges, the Electric Power Sector Reform Act, 2005 (“EPSRA”) was enacted, and it laid the foundational legal framework for liberalizing the power sector as it provided for the unbundling of PHCN into distinct successor companies handling generation, transmission and distribution, and the subsequent privatization of these entities. The Electricity Act, 2023 (the “Electricity Act”), which repealed the EPSRA, expanded the scope of these reforms by reinforcing private sector involvement through licensing regimes, decentralizing ownership, and regulating the electricity market by the state governments¹.

As a result of the combined effect of these legal instruments, a range of operational and investment structures has emerged across the sector, reflecting a deliberate move toward a more inclusive, efficient, and sustainable electricity market. This article examines Nigeria’s transition to a multi-structured power sector characterized by state coordination, private participation, collaborative frameworks, decentralized systems and its implications for energy security in Nigeria.

However, the effectiveness of these frameworks depends on robust regulation, improved market liquidity, enforceable contractual arrangements, and inclusive financing mechanisms that ensure equitable access. Accordingly, the article aims to examine the major structural frameworks operating in the sector, assess how each contributes to the pillars of energy security, identify the systemic constraints limiting their effectiveness, and recommend reforms focused on regulatory clarity, stronger institutional enforcement, investor confidence, and targeted support for vulnerable consumers. We concluded that it is important to have the right ownership model and owners in given contexts, but that these in themselves are not enough. More stringent enforcement of regulations and consumer protection, and capital are also needed going forward.

Conceptual Framework of Electricity Market Structures

The structure of participation in the power sector determines how electricity is generated, transmitted, and distributed, as well as how risks, responsibilities, and benefits are allocated among stakeholders. These frameworks exist along a spectrum ranging from fully state-driven systems to market-oriented arrangements involving private sector participation and hybrid collaborations. In addition, innovative service-based arrangements have emerged to address gaps in electricity access, particularly in underserved areas

Key Structural Models in Nigeria`s Electricity Market

1. State-Driven Model:

This model refers to a structure in which the government retains full or majority control over electricity infrastructure covering generation, transmission and distribution. The government is both the operator and the regulator. This framework affords direct control of crucial aspects of the power sector within its borders.

This model was historically dominant in Nigeria through entities like the now-defunct PHCN, formerly NEPA.² Under this framework, the government, largely dependent on public funds, handled the planning, funding, and operation of the power assets in Nigeria. However, this centralized model was gradually phased out due to its inefficiencies, poor service delivery and financial constraints associated with its operations. While Nigeria has privatized large portions of its generation and distribution segments, the transmission infrastructure remains under government control alongside certain selected generation assets developed under the National Integrated Power Projects (the “NIPPs”) such as Alaoji, Gbarain, Geregu.3

A notable recent development highlights the continued relevance and evolution of this model. On March 6, 2026, President Bola Ahmed Tinubu announced the constitution of an 11-member committee (the “Committee”) to ensure the seamless incorporation and operationalization of the Grid Asset Management Company Limited (“GAMCO”)⁴. GAMCO is intended primarily to modernize transmission evacuation and optimize stranded generation, beginning with the Benin–Lagos transmission corridor, which supplies bulk power to Ogun and Lagos states, Nigeria’s most significant industrial and commercial centres.

The Committee’s mandate includes a comprehensive review of the implications of the Electricity Reform Laws (2025) and related unbundling arrangements on asset management structures, institutional responsibilities, and regulatory oversight. It is also tasked with identifying areas of conflict, overlap, or inconsistency between the proposed GAMCO framework and existing legal and regulatory instruments. In addition, the Committee will assess the legal status, operational framework, and contractual obligations attached to the Niger Delta Power Holding Company and the NIPP assets, particularly the Omotosho, Olorunsogo, and Ihovbor plants, which are designated for GAMCO’s pilot phase.

2. Public-Private Partnership (“PPP”) Model

These arrangements involve “partnerships” between the state and private participants through mechanisms such as concession, lease, or joint ventures between the government and the private investor in relation to the operation of the generation, distribution and transmission infrastructure. In this model, private investors are typically awarded a concession to undertake the development and operation of power infrastructure for a designated timeframe. Once this agreed-upon period elapses, control and authority over the infrastructure revert to the state government.⁵ In essence, a private operator takes over electricity distribution operations, handling billing, collections, customer service and network maintenance during the concession period, while the government retains ownership of infrastructure and procures power from generators.⁶

These concession agreements allow private investors to get consistent revenue during the concession duration, while simultaneously affording state governments the advantages of infrastructure advancement in the power sector without the need for initial capital outlay. Examples of these in the power generation, particularly our hydro plants in Shiroro, Jebba, and Kainji, are fully concessioned.⁷

A significant development that has expanded the relevance of this model is the Fifth Alteration Act, 2023, which amended the Constitution of the Federal Republic of Nigeria 1999 (as amended), together with the Electricity Act⁸, to empower states within the federation to legislate on the generation, transmission, and distribution of electricity in areas covered by the national grid within their territories. Prior to this constitutional and statutory shift, states were limited to legislating only in off grid areas not served by the national grid.

This reform has materially broadened the scope for sub-national public-private collaboration, as state governments can now directly structure partnerships with investors for electricity projects within their jurisdictions, including grid-connected generation projects, transmission support infrastructure, distribution networks, embedded generation, and rural electrification schemes. This reform is particularly significant because it enables states to design commercially responsive partnerships tailored to local industrial clusters, urban demand centres, and underserved communities.

GAMCO or no GAMCO, it is far from obvious that significant progress can be made in the transmission sub-section as long as the FGN remains the owner there. More private sector and state government ownership would appear to be needed. Abia State, for example has lately been indicating that it is going in this direction.

3. Community-Based Energy Model

This model incorporates localized participation in energy projects, often structured through cooperatives or community-led initiatives. These systems are designed to address the unique energy needs of specific communities, particularly in rural or underserved areas. In practice, project arrangements may be structured through a special purpose vehicle involving both a project developer and a community energy cooperative, with clearly-defined participation rights, responsibilities, and benefit-sharing terms across electricity generation, transmission, and distribution. This approach allows for collaborative project development while ensuring that community stakeholders remain actively involved.

Such arrangements promote inclusivity and local engagement, although their scalability in Nigeria remains limited due to regulatory, financial, and technical constraints. Despite these challenges, they represent a viable pathway for decentralized energy access particularly under the framework of the Rural Electrification Programme. This model has been deployed in areas including the Rije Community in Abuja (biogas mini-grid)⁹ and the Mokoloki Community in Ogun State.¹⁰

4. Market-Oriented Private Participation Model

This structure involves private entities playing a central role in financing, developing, and operating electricity infrastructure. These can include Independent Power Producers (“IPPs”), privatized utilities, and mini-grid developers. One of the most significant IPPs in Nigeria is the Azura-Edo Power Plant, commissioned in 2018 in Edo State.¹¹ In Nigeria, several generation assets have undergone privatization, including those at Afam IV-V, Delta (Ughelli), Geregu, and Sapele.¹² There are also eleven privatized distribution companies, including the Aba Power Limited Electric, Enugu Electricity Distribution Company, Abuja Electricity Distribution Plc, Benin Electricity Distribution Plc, Ikeja Electric Plc.¹³

Footnotes

1. Electricity Act, s. 2(1) and 63.

2. Osayo O., “The History Of Nigeria’s Power Sector” in https://powerlibrary.theelectricityhub.com/wp-content/plugins/download attachments/includes/download.php?id=601 (Accessed June 30, 2025).

3. Odeyinka O., “These are the Entities that Control Nigeria’s Power Sector Value Chain” in https://nairametrics.com/2025/02/28/these-are-the entities-that-control-nigerias-power-sector-value-chain/ (Accessed 25/06/25).

4. https://statehouse.gov.ng/towards-optimising-the-power-sector-president-tinubu-inaugurates-committee-on-grid-asset-management company-gamco/ (Accessed 31/03/26).

5. Infrastructure Regulatory Commission, “Private-Public Partnerships in Nigeria”, https://www.icrc.gov.ng/ppp/#:~:text=Build%20Operate%20Transfer%20(BOT)%20and,investment%20costs%20through%20user%20charges. (Accessed April 27, 2025).

6. Gupta D.L. et al, “Operations Concessions for Electricity Distribution” in https://www.devdiscourse.com/article/other/3347572-efficiency without-ownership-how-concessions-can-reform-electricity-distribution (Accessed June 25, 2024).

7. Odeyinka O., supra note, 5.

8. Section 2.

9. Chinonso K., “How Nigeria’s Only Biogas Mini-grid Project Failed With Lessons to Learn” in https://primeprogressng.com/deep-dive/how nigerias-only-biogas-mini-grid-project-failed-with-lessons-to-learn/ (Accessed April 1, 2026)

10. RMI et al, “Nigeria’s First Commercial Undergrid Minigrid Project” in https://rmi.org/insight/mokoloki/#:~:text=A%20new%20undergrid%20minigrid%20pilot%20in%20Mokoloki%2C%20which,and%20communities %20can%20work%20together%20for%20mutual%20benefit (Accessed October 7, 2025).

11. Julius Berger, “Engineering, Procurement and Construction of 459MW gas turbine, Aura Edo Power Plant”, https://www.julius berger.com/references/azura-edo-independent-power-plant (Accessed April 25, 2025).)

12. Odeyinka O. supra note 8.

13. ibid.

To read this article in full, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.