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The passage of the Nigerian Electricity Management Services Authority bill (NEMSA)

By BusinessNews Staff on May 4, 2015

Recently, the Nigerian Senate passed a Bill to establish the Nigerian Electricity Management Services Authority (“NEMSA”). This is one controversial bill which many have argued will upset the already-steady regulatory environment of the Nigerian electricity sector. With this passage, the bill is awaiting President’s Jonathan’s accent to give it the full effect of law. However, one point that seems to worry most stakeholders is the unease and seeming regulatory uncertainty which the establishment of this institution will introduce into the Nigerian electricity market.

According to the bill, the institution (NEMSA) will be expected to carry out the functions of enforcement of technical standards and regulations, technical inspection, testing and certification of all categories of electrical installations, electricity meters and instruments. The proposed Authority is to take over the functions of the Electricity Management Services Limited (EMSL) established in 2007 to carry out technical inspections, test and certify electrical materials/equipment to ensure they are of right quality and standards.

In addition to assuming the functions of the EMSL, the primary functions of the Authority would include the issuance of competency certificates/electrical installation licenses to qualified electrical personnel and contractors working in NESI; carry out electrical inspectorate services for the NESI; and enforcing all statutory technical electrical standards and regulations amongst others.

As laudable at the objectives (of the creation of the Authority) appear to be, one major concern is the regulatory uncertainty the establishment of this institution will introduce into the power sector. It is therefore important to carefully understand the functions of Nigerian Electricity Regulatory Commission (NERC) vis-à-vis, the proposed functions of NEMSA and to objectively determine whether or not, the proposed Authority is necessary.

It is obvious from the above that the need to establish a parallel institution solely to ensure technical standards are met is suspect. With lesser government restrictions (such as is now being established), the resultant free market will force businesses to protect consumers, provide superior products or services, and create affordable prices for everyone (through enhanced competition in the market). Any unnecessary intervention or oversight function by government (either via regulations/policies or the creation of more governmental agencies) will create nothing but a bureaucracy that increases the cost of doing business. A classic instance in Nigeria that clearly suggests that a relatively free market offer more competitive advantage is the Nigerian Telecommunication Industry.

It suffice to say however that a regulated sector is encouraged in matters that impact directly on the safety/health of the general public as well as the environment and the stability of the economy. However, over regulation will only create a huge government bureaucracy that stifles growth/competition whilst consequently discouraging potential investment in the sector. The aftermath will be huge monopolies that cause consumers to pay more and the absence of innovation in the sector. The key is to strike a balance between free markets and the amount of government regulation needed to protect people and the environment. When this balance is reached, the public interest is protected and private businesses flourish.

In conclusion and advising against the final passage (into law) of the NEMSA Bill, the establishment of a parallel Authority (under the guise of NEMSA) will not only over-regulate the power sector, it will also (and needlessly so) lead to increased executive spending; funding an entirely new government agency. In the alternative, the EPSRA should be amended immediately (perhaps under the incoming 8th Assembly) to specifically direct departments/Commissioners of relevant areas to focus solely on them.

[Business Day]

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