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For an electricity market like this to work efficiently and in which confidence is shared by all, Nigeria must change its ways of running the power sector. This means strengthening NERC so that it can have greater independence and more capability, as well as embracing performance-based rewards for those who do well. The British model offers practical insights, not a blueprint. It is a toolkit shaped over decades that Nigeria can adapt to its own reality.
Nigeria’s power sector is still plagued by persistent structural inefficiencies. Political slogans and patchwork solutions will not solve the problem. Nigeria lacks a strong regulatory framework that is clearly defined and built on performance indicators. With a population of more than 200 million people and a soaring demand for energy, the system has reduced investment, stopped the delivery of services, and wasted the public’s energy. Worldwide, one good example can be found in Britain, whose electric power market, albeit operating in a liberalised and disciplined framework, is still overseen by the independent Office of Gas and Electricity Markets (Ofgem).
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The organisational goals of Ofgem include consumer protection, infrastructure planning, innovation, and enforcement services, as well as others. What makes it unique is its commitment to realigning the incentives of public utilities with those of measurable results, while being managed by clear regulations that are relatively free from interference by politicians. The Nigerian regulator, Nigerian Electricity Regulatory Commission (NERC), was established under the Electric Power Sector Reform Act of 2005 and has similar powers. NERC issues licenses, sets tariffs, and regulates to protect consumers, while expanding the industry. But in practice, these powers are undermined by a tendency towards regulatory capture, weak enforcement, and fragmented decision-making. As a result, NERC is simply unable to act as a referee that the market can respect.
One vivid example of regulatory failure is Nigeria’s metering crisis. A recent report of the National Bureau of Statistics shows that as of 2023, 85.2 per cent of electricity customers were still subject to estimated billing, with only 14.8 per cent using prepaid meters. This imbalance doesn’t just reflect an administrative lapse. It encourages inefficiency, causes financial losses and fosters mistrust. Estimated billing has become symbolic of the broader culture of opacity and lack of accountability in Nigeria’s power sector. In the United Kingdom, metering is universal. Smart meters are increasingly deployed to allow real-time billing, monitor consumption patterns and optimise the grid. Utilities are compelled to meet specific metering targets and they face financial penalties if they fail. This focus on data helps shape better planning, load management and policy intervention. Nigeria’s regulators, in contrast, lack reliable data and insight into the operations of power companies. Without that foundation, reform is difficult to measure and impossible to enforce.
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Each distribution company could be scored on an annual basis, with the level of gross margins they are allowed to keep being determined accordingly. This would mean a move from a top-down bureaucracy model towards evidence-based supervision hinged on performance, rather than methods. For it to work successfully, however, a strong data system and independent monitoring must be built…
Nigeria has this unique opportunity to design its own performance-based regulatory scheme, with inspiration drawn from, not outright imitation of the UK’s RIIO framework. The RIIO (Revenue = Incentives + Innovation + Outputs) framework places network operators under multi-year price controls linked to performance indicators such as customer satisfaction, frequency of outages, and investment performance. It rewards those meeting set standards, and penalises those who fall short.
NERC could translate this to Nigeria’s network conditions by basing itself on three-dimensional indicators: transformer life expectancy, time for faults to be repaired, and the ratio of prepaid/normal meters in use. Each distribution company could be scored on an annual basis, with the level of gross margins they are allowed to keep being determined accordingly. This would mean a move from a top-down bureaucracy model towards evidence-based supervision hinged on performance, rather than methods. For it to work successfully, however, a strong data system and independent monitoring must be built, and there must be genuine political commitment to enforce sanctions, regardless of ownership or influence.
Regulation cannot be produced in an incubator. It also requires brisk investments in transmission lines and automation, as well as fostering a technical workforce. But often long-term plans are upset by political changes or shifts in priorities, though there are professionals with experience, as well as those willing to change the old mould. What is lacking is durability: Institutions that escape influence and remain committed to technical ability.
Consumer engagement is another area in which Nigeria falls far short. In the UK, consumers know the ins and outs of price setting, torch information services, and their rights under the law in detail. Regulatory decisions in the public interest often concern members of the public and are subject to detailed impact assessments. Nigeria, in contrast, typically engages the public only in a superficial manner. Complaints go unanswered, and regulatory hearings seldom produce change. Rebuilding the public’s confidence requires not just correcting billing habits but also a move away from an ethos of obscurity and lack of accountability seen within Nigeria’s power sector. The country’s power supply likewise suffers severely from infrastructural constraints. The grid is patchy, erratic, and underpowered, as parts of it built in colonial times simply break down. Load shedding is routine and voltage variation common.
Regulation cannot be produced in an incubator. It also requires brisk investments in transmission lines and automation, as well as fostering a technical workforce. But often long-term plans are upset by political changes or shifts in priorities, though there are professionals with experience, as well as those willing to change the old mould. What is lacking is durability: Institutions that escape influence and remain committed to technical ability. For an electricity market like this to work efficiently and in which confidence is shared by all, Nigeria must change its ways of running the power sector. This means strengthening NERC so that it can have greater independence and more capability, as well as embracing performance-based rewards for those who do well. The British model offers practical insights, not a blueprint. It is a toolkit shaped over decades that Nigeria can adapt to its own reality.
Maclean Jacob Eneotu is an energy policy expert based in Glasgow, United Kingdom. He holds a PhD in Chemical and Process Engineering and has worked in regulatory and academic roles.
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