NERC’s Sets New Licensing Rules for Nigeria’s Electricity Sector

by Ikem Emmanuel

The Nigerian Electricity Regulatory Commission (NERC) has set forth a comprehensive framework for licenses and permits under the 2023 Electricity Act. These licenses are designed to govern activities related to the generation of electricity up to 1 megawatt (MW) and the operation of electricity distribution networks up to 100 kilowatts (KW). Let’s take a closer look at these licenses and what they entail:

1. Generation License:

– On-Grid Generation License:

This license is for those connected to the national grid. It involves long-term agreements with the Transmission Company of Nigeria (TCN) and off-takers.

– Embedded Generation License:

These generators are directly connected to the distribution system and have agreements with privatized distribution companies (DisCos) and independent electricity distribution networks (IEDNs).


– Off-Grid Generation License:

Intended for those generating power for sale to single buyers.

2. Transmission License:

– Authorizes the transmission and conveyance of electric power over a high-voltage transmission system.
– Permits transmission at high voltages (≥132kV) within or between systems, including the use of transformers, switchgear, and other related infrastructure.

3. Supply License:

– This authorizes the sale of electricity to license holders or consumers. It’s important to note that electricity supply is distinct from distribution.

4. Distribution License:


– Allows for the construction, operation, and maintenance of a distribution system that delivers electricity to consumers.

5. Trading License:

– Permits the licensee to engage in the purchasing, selling, and trading of electricity.


6. System Operation License:

– Authorizes the operation of one or more transmission systems. This license manages generation scheduling, commitment, and dispatch. It also plays a crucial role in the administration of the wholesale electricity market and settlement payments.

7. Permits and Authorizations:


– Eligible Customer:

These customers can purchase power from a licensee other than a distribution licensee.

– Mini-Grid:

Refers to an electricity supply system with its own generation capacity not exceeding 1MW.

– Captive Power Generation Permit:


For those generating electricity exceeding 1 MW for self-consumption.

– Meter Asset Provider (MAP):

Entities approved by the Commission to provide metering services, including financing, procurement, supply, installation, maintenance, and replacement.

– Meter Service Provider (MSP):


Individuals certified by the Commission as manufacturers, suppliers, vendors, or installers of electric energy meters and/or metering systems.

These licensing rules, as outlined in the 2023 Electricity Act, mark a significant step forward for Nigeria’s electricity sector. They are expected to promote embedded power generation, hybridized generation, co-generation, and the use of renewable energy sources such as solar, wind, small hydropower, biomass, and other renewables.

The Act also aims to address post-privatization issues within Nigeria’s electricity sector, strengthen the regulatory framework, and tackle issues of bankruptcy within distribution companies (DisCos). It is a vital move towards enhancing the efficiency and sustainability of the nation’s power supply infrastructure, and it holds the potential to open up new avenues for clean and reliable energy sources.

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