Infrastructure

Bloomfield LP Nigeria’s 2025 Energy Outlook: States to Gain Control with Decentralised Electricity Regulation

Published by
Emmanuel Eze

A newly released report by Bloomfield LP offers a sweeping analysis of Nigeria’s energy landscape for 2025, emphasizing significant reforms aimed at decentralizing electricity regulation across the country.

The report highlights the Nigerian government’s continued push for structural changes in the power and mining sectors, aiming to drive efficiency, attract investment, and reduce subsidy burdens.

State-Level Control Over Electricity Markets

A key focus of the 2025 outlook is the shift towards state-level regulation of electricity markets, enabled by the Electricity Act of 2023. The report explains that several states have already begun the process of establishing independent electricity markets, with Enugu and Ondo completing the transition, while others like Lagos, Imo, and Ekiti are in varying stages of implementation.

The Electricity Act grants individual states the authority to regulate generation, transmission, and distribution within their territories. This structural shift, as outlined in Bloomfield LP’s report, marks a departure from centralized oversight by the Nigerian Electricity Regulatory Commission (NERC). It aims to create localized regulatory environments that better address state-specific power challenges and unlock investments.

“Decentralization is expected to bring market discipline, improved service delivery, and healthier competition in the power sector,” the report states, while cautioning that states must ensure they possess sufficient resources and expertise to manage their electricity markets effectively.

The shift towards decentralization also reduces reliance on the Nigerian Bulk Electricity Trader (NBET) by encouraging direct contractual relationships between power generation companies (GenCos) and distribution companies (DisCos). Under this model, states can design and manage their electricity tariffs and service agreements, enhancing accountability and market performance.

Tariff Adjustments and Subsidy Reforms

Another pivotal development in the energy sector outlined in the report is the Nigerian government’s decision to scale back electricity subsidies in 2025, particularly for high-consumption customers categorized as Band A.

The report reveals that the Federal Government has struggled to manage the financial burden of electricity subsidies, which amounted to over ₦135 billion in just the second quarter of 2024. Consequently, the Multi-Year Tariff Order (MYTO 2024) has been revised to adopt cost-reflective tariffs for Band A customers, who receive 20-24 hours of electricity daily. Meanwhile, subsidies will continue for Bands B to E, where electricity supply is less stable.

Bloomfield LP emphasizes the importance of balancing market sustainability with affordability. While the removal of subsidies for Band A customers is expected to reduce financial strain on the government, it could also raise electricity costs for industries and high-consumption households. The report suggests that proper regulatory oversight and enforcement of service quality metrics will be crucial in preventing price exploitation and service deterioration.

Additionally, the Federal Government’s shift towards cost-reflective tariffs is paired with the implementation of bilateral power contracts. These contracts aim to ensure market stability by fostering direct agreements between DisCos and GenCos, minimising revenue shortfalls, and encouraging market efficiency.

Mining Sector Reforms and Renewable Energy Initiatives

Beyond power sector reforms, the Bloomfield LP report sheds light on Nigeria’s evolving mining sector and its potential to drive economic diversification. Significant developments include the inauguration of a multi-million naira lithium processing plant in Nasarawa State and the unveiling of a dedicated security task force, the Mines Marshal, to combat illegal mining activities.

The lithium plant, inaugurated in May 2024, has the capacity to process 4,000 metric tonnes of lithium per day, positioning Nasarawa as a hub for mineral processing. The report highlights the state government’s collaboration with a Chinese mining firm, emphasising foreign direct investment and local value addition in the sector.

Security concerns within the mining industry have also led to the creation of the Mines Marshal, a specialised task force comprising 2,220 operatives from multiple security agencies. The task force’s mandate includes eliminating illegal mining operations while safeguarding licensed activities, a move the report describes as critical to boosting investor confidence.

In the renewable energy space, the report outlines the Federal Government’s recent partnership with the European Union and the German Government in a €17.9 million agreement aimed at expanding off-grid power solutions in rural Nigeria. This initiative, part of the Nigerian Energy Support Programme, targets providing electricity to over 154,000 people and clean cooking gas to 30,000 households.

The Bloomfield LP report underscores that these reforms, if effectively implemented, could significantly alter Nigeria’s energy landscape. Decentralised electricity markets, reformed tariffs, and expanded renewable energy projects have the potential to create a more resilient energy sector, reduce dependency on subsidies, and encourage both local and foreign investments in 2025.

Emmanuel Eze

Emmanuel Eze is an early career journalist with an interest in reporting economic and business related issues

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