Highlights
- Constitutional amendment, which empowers states in the country to license, generate, transmit, and distribute electricity is expected to stimulate competition, cut costs of production, make Nigeran businesses more competitive and boost economic growth.
- The law is expected to enhance infrastructure development in terms of power generation capacity, improve the availability and reliability of electricity supply, and could be a driver to influence the use of alternative sources of power generation such as the renewable energy.
- The law is expected to increase the involvement of the state in national power generation thereby creating more internally generated revenue and attract more private investors.
Event
On March 17, 2023, it was announced that the president had signed 16 Constitution Amendments Bills into law. Two of such laws which now empowers Nigerian States to generate, transmit and distribute their own electricity in areas covered by the national grid and to construct and operate railways have the potential to make a direct impact on economic growth and development in Nigeria. States are now able to function as proper centers of production and can better plan and develop their economies at their own chosen pace.
Analysis/Opinion
Finally ‘Light’ at the End of the Tunnel?
The importance of sufficient and constant supply of electricity for economic growth and development is well established and cuts across the production, transport, and services sectors, all the way down to basic needs of private households. Properly functioning businesses, industry, commerce, and public services including education, healthcare and communication are highly dependent on access to sufficient and constant energy. However, electricity supply in Nigeria has been characterized by inadequate supply and frequent power failures and loading which has stifled economic activity, private investment, job creation and human development and prompted businesses and households to turn to expensive alternative sources. These amendments, therefore, have a direct impact on job creation and economic growth, given that power, transport, and distribution challenges have featured among the biggest costs to Nigerian companies and to the ease of doing business in the country. Energy (especially from alternative sources) and transport costs have remained high and have been constantly rising especially since the COVID 19 pandemic and the Russia-Ukraine war. According to the National Bureau of Statistics, Diesel Prices have risen by 182% in the last year. In 2022, quoted companies on the Nigerian Stock Exchange saw their power costs rise by over 33% and many have an energy cost to total production cost ratio of about 40%. The World Bank also estimates that the economic cost to Nigeria from electricity charges is about $28 billion equivalent to 2% of GDP.
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