REA chief warns against new energy bill, says proposed law could fragment electricity market

The Managing Director of the Rural Electrification Agency (REA), Abba Aliyu, has warned that the proposed law to establish a National Authority for Renewable Energy (NARE) could create regulatory uncertainty, discourage private investment and undermine Nigeria’s emerging renewable energy market.

Mr Aliyu made the argument in a right-of-reply document made available to PREMIUM TIMES following the newspaper’s report on the House of Representatives’ consideration of the Electricity Act (Amendment) Bill, 2025.

In the document titled “Do not fragment a market that is beginning to work: Why the proposed Electricity Act amendment risks setting back Nigeria’s renewable energy revolution,” Mr Aliyu questioned whether creating another regulatory institution would improve electricity access or complicate the operations of existing institutions.

He acknowledged the National Assembly’s responsibility to review legislation and the need to accelerate renewable energy development but argued that the proposed institutional arrangement required fundamental reconsideration.

“The question is whether creating another regulatory institution will produce one additional megawatt of electricity, one additional connection, one additional manufacturing plant or one additional naira of private investment,” he said.

The House on 15 October advanced the bill, sponsored by Afam Ogene, the chairman of the House Committee on Renewable Energy, for second reading. The proposed legislation seeks to establish NARE as the principal institution responsible for regulating and promoting renewable energy development in Nigeria.

Under the proposal, renewable energy responsibilities currently exercised by the Nigerian Electricity Regulatory Commission (NERC), REA and the Rural Electrification Fund (REF) would be transferred to the new authority.

The bill also proposes allocating 40 per cent of the annual Rural Electrification Fund to NARE.

Mr Ogene had argued during the debate that a dedicated authority would address overlapping responsibilities, improve coordination and provide a focused regulatory framework for the sector.

However, Mr Aliyu contended that Nigeria’s electricity market was undergoing a significant decentralisation following the Electricity Act 2023, which enabled states to establish and regulate intrastate electricity markets.

He argued that introducing another federal regulator at a time when federal and state institutions were still working out their respective responsibilities could create additional jurisdictional disputes.

According to him, a single renewable energy project could require engagement with NERC, state electricity regulatory commissions, NARE and other institutions, potentially increasing approval requirements and regulatory costs.

“At a time when we are carefully managing the relationship between a federal regulator and emerging state regulators, introducing another federal regulator organised around a technology creates a new axis of jurisdiction,” he said.

“That is not simplification. It is fragmentation.”

Investment concerns

Mr Aliyu said the proposed authority could also affect investor confidence in Nigeria’s distributed renewable energy market, which includes mini-grids and other off-grid electricity systems serving communities with limited access to the national grid.

He said investors needed clarity on licensing, tariffs, grid interconnection, dispute resolution and the division of responsibilities between federal and state regulators before committing capital to long-term infrastructure projects.

He argued that uncertainty over which institution would regulate a project could increase financing costs and make some investments commercially unviable.

“Capital dislikes ambiguity,” he said, warning that additional regulatory requirements could ultimately increase electricity costs or prevent projects from reaching financial close.

Mr Aliyu cited the World Bank-supported Distributed Access through Renewable Energy Scale-up (DARES) programme, a $750 million initiative designed to expand electricity access to more than 17.5 million Nigerians through distributed renewable energy.

The programme targets 1,225 mini-grids and 465 megawatts of renewable energy generation, with private-sector investment central to its implementation.

He also cited the Nigeria Electrification Project, which he said had reached more than 7.8 million Nigerians with clean energy, while more than 1.1 million households received new or improved electricity services.

According to him, more than 1,000 mini-grid projects are under development through programmes implemented by the REA.

Mr Aliyu further disclosed that the agency had signed financing memoranda of understanding with FCMB, Lotus Bank, Alpha Morgan and Stanbic IBTC worth a combined ₦350 billion in potential domestic financing commitments for the sector.

The agreements, he said, demonstrated growing interest from Nigerian financial institutions in distributed renewable energy as an investible asset class.

He argued that the government should strengthen the existing framework and provide greater regulatory certainty rather than add more layers of oversight.

Dispute over the role of the Rural Electrification Fund

The REA chief also questioned the proposal to allocate 40 per cent of the annual Rural Electrification Fund to the proposed authority.

He said the fund was designed to address electricity-access challenges in communities where low customer density, limited purchasing power and weak initial demand made commercial investments difficult.

Although renewable energy could efficiently serve many such communities, he argued that the fund’s ultimate objective should remain expanding electricity access rather than promoting a particular technology.

“Every naira allocated from an electricity-access fund should be evaluated against a straightforward question: How many additional Nigerians will this connect to reliable electricity?” he said.

Mr Aliyu also distinguished between the responsibilities of a regulator and those of an institution responsible for developing the electricity market.

He said NERC’s primary responsibility was to regulate electricity markets, while the REA supported project development, mobilised financing and helped expand electricity provision in underserved communities.

Combining renewable energy promotion, project development, licensing, tariff regulation, technical oversight and dispute resolution within one institution, he argued, could blur the distinction between market development and regulation.

Alternative proposal

While opposing the proposed regulatory structure, Mr Aliyu said Nigeria could still establish a dedicated institution to strengthen renewable energy development if its mandate focused on areas not adequately served by existing institutions.

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He suggested such an institution could promote investment, mobilise green finance, support research and innovation, improve renewable energy resource mapping, develop local manufacturing and supply chains, build technical skills, and coordinate activities between federal and state governments.

He said these functions could strengthen the sector without creating a parallel electricity regulator.

“Nigeria needs an institution that helps renewable-energy companies navigate the market, not another institution they must navigate,” he said.

Mr Aliyu acknowledged that the existing framework had shortcomings, including coordination challenges, gaps in federal-state regulatory harmonisation, inadequate data integration and lengthy project development timelines.

He argued, however, that these problems should be addressed through improved coordination and clearer responsibilities rather than automatically creating another agency.

He urged the National Assembly to conduct a regulatory-impact assessment of the proposed amendment and consult state governments, investors, lenders, renewable energy developers and development finance institutions before proceeding.

He also called for an assessment of the implications of the proposed changes for existing licences, contracts, concessions and development-finance commitments.

The bill, which has passed second reading in the House, is expected to undergo further legislative scrutiny by the relevant committee.

Mr Aliyu said lawmakers should judge the proposed amendment by whether it would increase electricity connections, expand generation capacity, attract private investment and improve reliable power supply, rather than by the number of institutions it would create.