By Adetayo Adegbemle
Nigeria’s power sector has reached another defining moment.
The creation of the Nigerian Independent System Operator (NISO) under the Electricity Act 2023 was intended to mark a decisive break from decades of institutional overlap that weakened electricity market governance. Officially inaugurated in March 2025, NISO was established to independently manage the national electricity grid and oversee market operations, separating those responsibilities from the Transmission Company of Nigeria (TCN).
The reform reflected international best practice. In mature electricity markets, system operators function independently of market participants, ensuring that electricity is dispatched based on technical efficiency, economic merit and grid reliability rather than political or commercial interests.
Yet more than a year after its inauguration, Nigeria’s Independent System Operator remains constrained.
The challenge is no longer legislative.
It is institutional.
At the centre of the problem is the continued dominance of the Nigerian Bulk Electricity Trading Company (NBET), whose enduring role in electricity trading risks undermining the very independence that NISO was created to achieve.
Every successful electricity market depends on a clear separation of responsibilities.
The system operator is responsible for maintaining grid stability, balancing electricity supply and demand in real time, managing system reliability and dispatching available generation according to transparent technical and economic criteria.
Electricity traders, by contrast, negotiate commercial contracts, manage financial settlements and optimise contractual returns.
These are fundamentally different functions.
When the same institution performs both roles—or when political relationships blur the distinction—the market inevitably becomes distorted.
The system operator can no longer act solely in the interest of grid efficiency. Commercial and political considerations begin influencing operational decisions, reducing transparency and weakening investor confidence.
This is precisely why electricity market reforms across Europe, North America and several emerging economies have progressively separated system operation from electricity trading.
Nigeria embraced the same principle through the Electricity Act 2023.
However, implementation remains incomplete.
NBET was established as a transitional bulk trader during the early stages of Nigeria’s electricity market reform. Its mandate was understandable at the time: provide payment assurance, aggregate electricity purchases and reduce market risks while private market structures matured.
Over time, however, NBET evolved beyond its original transitional role.
Rather than simply facilitating contracts, it became the dominant intermediary for electricity transactions involving government-backed generation companies, particularly those owned by the Niger Delta Power Holding Company (NDPHC).
As long as NBET continues to occupy this privileged position, NISO cannot exercise complete operational independence.
The system operator may possess legal authority over dispatch decisions, but those decisions inevitably intersect with contractual arrangements, government liabilities and political considerations flowing through NBET.
Independence therefore exists more in legislation than in practice.
The consequences extend beyond governance.
They affect electricity supply, market efficiency and investor confidence.
NDPHC owns more than 5,000 megawatts of installed generating capacity across ten power plants, making it Nigeria’s largest government-owned generation portfolio.
Yet dispatch decisions involving these assets continue to be influenced by contractual structures and historical arrangements rather than operating solely within a fully competitive market framework.
At the same time, Nigeria continues to utilise only a fraction of its installed generation capacity.
Despite installed capacity exceeding available grid demand, electricity delivered to consumers frequently remains well below potential because of constraints across generation, transmission, distribution and market coordination.
Every megawatt that remains stranded represents lost economic output for manufacturers, small businesses and households.
An independent system operator cannot maximise available capacity if operational decisions remain constrained by overlapping institutional interests.
Electricity investors pay close attention to governance.
Capital flows towards markets where operational decisions are transparent, commercially predictable and insulated from political intervention.
An independent system operator is therefore not merely a technical institution.
It is a signal of market credibility.
Countries seeking long-term investment in electricity infrastructure increasingly recognise that governance reforms matter as much as physical infrastructure.
Private investors are more willing to finance generation plants, transmission infrastructure and storage projects when dispatch rules are transparent and market operators act independently.
Nigeria cannot expect to attract substantial long-term investment while uncertainty persists over who ultimately controls operational decisions.
The solution is neither complicated nor unprecedented.
Nigeria should complete the institutional separation envisioned by the Electricity Act.
First, NBET should conclude its transition from a government-backed intermediary to a market participant operating under the same commercial rules as every other trader.
Government support for strategic generation assets, including those owned by NDPHC, should be made explicit through transparent fiscal appropriations where necessary—not through contractual arrangements that indirectly influence dispatch decisions.
Second, NISO’s governance must be protected from political interference.
The quality of its board appointments is important, but genuine independence depends on governance structures that shield operational decisions from ministerial or political influence.
Dispatch decisions must remain technical decisions.
Third, electricity trading should increasingly migrate towards competitive bilateral contracts between generation companies and electricity distribution companies, reducing dependence on government intermediaries and strengthening market discipline.
Finally, NISO must possess both the legal authority and operational resources necessary to enforce grid codes, balancing obligations, ancillary service requirements and dispatch instructions.
An operator that cannot enforce its decisions cannot effectively operate a competitive electricity market.
Why This Matters for Nigeria’s Economy
Nigeria’s electricity challenge is often framed as a shortage of generation.
In reality, the problem is more complex.
Gas supply remains constrained. Transmission capacity requires significant expansion. Distribution losses continue to erode sector revenues.
These physical constraints are well understood.
But efficient system operation determines how effectively existing infrastructure is utilised while those longer-term investments are being made.
That responsibility belongs to NISO.
For the operator to fulfil its mandate, it must be allowed to make technical decisions without institutional conflict or competing political obligations.
Let NISO Be NISO
The Electricity Act 2023 created the legal foundation.
The inauguration of NISO established the institutional framework.
What remains is the political resolve to complete the reform.
This is not an argument against NBET or the professionals who have managed its responsibilities over the years.
Rather, it is an argument for completing Nigeria’s electricity market transition.
No modern electricity market can sustain two federal institutions occupying overlapping operational space without creating uncertainty, inefficiency and conflicting incentives.
Nigeria has already chosen the path of market reform.
It should now finish the journey.
Allow NISO to function as the truly independent system operator envisaged by law.
Allow electricity trading to evolve into a competitive commercial activity.
And allow governance—not institutional overlap—to become the foundation of Nigeria’s electricity market.
Only then can the country build a power sector capable of supporting industrial growth, attracting private investment and delivering reliable electricity to millions of consumers.
Adetayo Adegbemle is a public affairs analyst, researcher and Convener of PowerUpNigeria, an electricity consumer advocacy organisation based in Lagos, Nigeria.