Lagos is ramping up state-backed electricity generation and distribution after securing 400 megawatts of new supply, as Nigeria’s unreliable national grid continues to fall short of demand.
Lagos, Nigeria’s commercial capital, is betting that the country’s chronic electricity shortages can be tackled outside the national grid, scaling up state-backed power generation and distribution after securing 400 megawatts of new supply.
The Lagos State Commissioner for Energy and Mineral Resources, Biodun Ogunleye, disclosed this on Tuesday at a conference organised by BusinessDay newspaper, saying the state is determined to reduce dependence on the fragile national grid.
The move comes as Nigeria’s centralised electricity system continues to struggle, with frequent grid collapses and generation levels that remain far below national demand.
“We are seeking to move beyond a single point of failure,” Reuters quoted Mr Ogunleye as saying.
Nigeria’s national grid delivers about 3,000 megawatts on a good day, far below the estimated demand of over 30,000 megawatts, according to government power plans. The national grid has collapsed on several occasions this year, throwing millions of citizens into darkness.
The shortfall has forced businesses and households across the country to rely heavily on diesel and petrol generators, as well as solar-powered mini-grids as an alternative.
Under the Electricity Act 2023, states are now empowered to regulate electricity within their territories, paving the way for decentralised power markets.
At least 22 states have begun setting up electricity markets to reduce reliance on the centralised system managed from Abuja, according to data from the Nigerian Electricity Regulatory Commission (NERC).
Lagos has emerged as the frontrunner in implementing the reform.
The state activated its electricity regulatory regime in June 2025 and transferred oversight of intrastate electricity matters from NERC to the Lagos State Electricity Regulatory Commission (LASERC).
By the end of 2025, Lagos had assumed full regulatory control of its electricity market, becoming the first state in Nigeria to complete the transition, according to officials.
In a circular issued last year, NERC clarified that while state regulators would oversee intrastate electricity matters, it would retain responsibility for interstate electricity transactions, national grid operations, and industry standards.
Meanwhile, a recent report published by PwC (PricewaterhouseCoopers) revealed that Nigeria’s power sector is undergoing one of its most far-reaching transformations in decades, as the implementation of the Electricity Act 2023 shifts the industry from a centrally controlled system to a decentralised, multi-tier electricity market.
A defining feature of the reform is the transfer of regulatory authority to states, enabling them to license operators, set tariffs, and oversee electricity markets within their jurisdictions.
According to the report, more than 15 states are at various stages of activating their electricity markets, with some already establishing regulatory commissions and embedding power planning into broader economic strategies.
However, progress remains uneven.
While states such as Lagos are adopting structured, phased approaches, others lag in regulatory capacity, technical expertise, and financial readiness—raising the risk of fragmented markets with differing standards and outcomes.
Experts warn that without stronger coordination, overlaps between federal and state roles—especially on tariffs, subsidies, and technical standards—could create uncertainty and slow progress.
As part of its strategy, Lagos has signed power purchase agreements (PPAs) with Fenchurch Power, Mainland Power, and Viathan Engineering Limited to supply up to 400 megawatts of electricity to public facilities over the next three years.
Mr Ogunleye said the agreements represent a major departure from the conventional electricity procurement model.
“These are not business-as-usual PPAs,” he said. “They represent a fundamental shift in how Lagos procures and pays for power.”
According to him, Lagos has eliminated the controversial “take-or-pay” and “deemed energy” provisions, which previously required payments even when electricity was not delivered.
Instead, the state will pay only for metered electricity actually supplied.
Officials say the new approach is aimed at improving accountability, reducing waste, and ensuring better value for public funds while strengthening electricity supply to key public institutions.
