The Lagos electricity market offers significant investment opportunities as Nigeria’s commercial hub continues its push toward energy reform and improved access to reliable power. The Lagos State Electricity Market (“LSEM”), governed by the Lagos State Electricity Law, 2024, provides a robust regulatory framework for private investment across the electricity value chain in Lagos State. With growing electricity demand driven by Lagos’ population of over 20 million and its position as Nigeria’s economic engine, 2025 is poised to be a transformative year for power sector investors in Lagos. In this update, we highlight some of the key investment opportunities presented by the Lagos State Electricity Law, 2024.
Investment Opportunities under the Lagos State Electricity Law.
The Lagos State Electricity Law provides the legal foundation for a localised electricity market, independent of federal constraints, enabling investors to engage directly in energy-related projects and effectively liberalising the LESM. We highlight some of the investment opportunities created by the Lagos State Electricity Law.
- Electricity Generation: This involves the process of producing electrical energy from various sources such as gas, solar, wind, hydro, biomass, etc. The key area of regulation includes: the development and operation of power plants or generation facilities, compliance with environmental standards and safety protocols for generating electricity, licensing requirements for electricity generation licensees above specified capacity thresholds[1] and renewable energy incentives and compliance for green energy sources.
- Electricity Transmission: This involves the bulk transfer of electricity from generation facilities to distribution networks via high-voltage lines. The key areas of regulation includes, the construction and maintenance of transmission infrastructure (e.g., towers, substations, transformers), non-discriminatory open access, ensuring grid stability and synchronization with national grid systems where necessary, coordination with stakeholders to ensure unimpeded power flow and regulations for wheeling charges.
- Electricity Distribution: This involves the delivery of electricity from transmission systems to end-users like households, businesses, industries. The key areas of regulation includes, the design, operation, and maintenance of distribution networks (low and medium-voltage systems), non-discriminatory access, standards for metering, billing, and customer service, consumer protection as well as dispute resolution mechanisms between distributors and consumers, regulation of tariffs and charges for consumers and rural electrification.
- Electricity Trading: This involves the bulk purchase of electricity from a generation licensee, including a person licensed by any other regulator to generate electricity outside Lagos State and resale electricity to any distribution or supply licensee, or a bulk consumer. The key areas of regulation involves licensing requirements for traders, compliance with market rules and trading standards, pricing mechanisms for power purchase agreements (PPAs) or bilateral contracts.
- Electricity Supply: This involves the provision of electricity supply to residential and non-domestic premises. The key areas of regulation include the procurement of bulk electricity for resale from a generating licensee or trading licensee, compliance with all the relevant market rules and grid code; consumer rights protection, including quality of service and reliability standards.
- Off-Grid Systems: This involves standalone energy systems that operate independently of the national grid, often used for rural or remote areas. The key areas of regulation includes licensing of microgrids and standalone renewable energy systems, encouraging investment in off-grid solutions for communities not connected to the grid and standards for operation, maintenance, and consumer tariffs for off-grid systems.
- Embedded Generation: This involves the development of small-scale generation facilities designed to supply electricity directly to local consumers without relying on the main transmission network. The key areas of regulation involves, the licensing of embedded generators, ensuring the safety and reliability of small-scale generation facilities and integration with distribution networks for surplus power sales.
- Renewable Energy and Energy Efficiency: This involves the promotion and adoption of renewable energy solutions and standards for reducing energy consumption. The areas of regulation involves, designing incentives for renewable energy projects (solar, wind, biomass, etc.), enforcement of energy efficiency codes for buildings and industries, demand side management, emissions regulation and standards for energy-efficient appliances and equipment.
- Energy Storage Systems. The involves the use of technologies to store electricity for later use, improving grid reliability and supporting renewable energy. The key areas of regulation would include, the licensing for operators of large-scale energy storage solutions, safety and environmental standards for storage systems like batteries and integration of storage systems with grid and off-grid operations.
Why Lagos?
There are a number of reasons why we believe investing in the electricity market in Lagos, presents a compelling investment opportunity for strategic and financial investors. These include:
(a) Demand-Supply Gap & Self Generation: Lagos consumes a significant portion of Nigeria’s total electricity supply, accounting for about 25% of Nigeria’s energy consumption. However, there is still a significant mismatch between demand and supply. Lagos State currently receives an estimated 1,000 MW to 1,200 MW of electricity from the national grid, depending on daily fluctuations and grid stability. This figure is a small fraction of the State’s estimated electricity demand, which is between 10,000 MW and 15,000 MW. We estimate that, self generation adds an estimated 5,000 MW to 6,000 MW of off-grid electricity.
(b) Huge Demand for Electricity: Lagos is home to over 20 million people, making it one of the most populous cities in Africa. This creates a massive and diverse consumer base for electricity consumption.
(c) Growing Urbanization: The rapid urban growth of Lagos requires increased power for residential, commercial, and industrial purposes.
(d) Vibrant Economy: Lagos contributes over 35% of Nigeria’s GDP, making it the commercial and industrial heart of the country. Power-intensive industries, such as manufacturing, financial services, and logistics, are heavily concentrated in Lagos. Lagos also has a concentration of high energy-intensive businesses and industries that rely on electricity for operations, creating a reliable and lucrative customer base for electricity investors. Lagos’s relatively high per capita income means residents and businesses are willing to pay for reliable electricity.
(e)Untapped Renewable Potential: Solar mini-grids and renewable energy solutions remain underdeveloped, offering opportunities for green energy investments. Lagos’s location along the Atlantic Ocean provides consistent wind resources that can be harnessed for offshore wind energy. Also, Lagos’s coastal geography allows for unobstructed sunlight in many areas. Being a tropical city, Lagos experiences abundant solar radiation year-round.
(f) Lagos State Electricity Law, 2024: The recently passed Lagos State Electricity Law (2024) provides a detailed and well-thought out framework for private sector investment in electricity generation, transmission, and distribution within Lagos.
(g) Strategic Geographic Location: Lagos serves as a gateway to the rest of Africa, in that Lagos remains a major trade hub in West Africa, with extensive port and logistics infrastructure. This creates demand for reliable electricity to support trade, logistics, and industrialisation. Lagos State is also home to Nigeria’s largest ports, Africa’s biggest and the world’s largest single-train refinery, international airports, and industrial free trade zones, which are all electricity-intensive and ideal for targeted investment.
This publication is not intended to provide legal advice and is not prepared with a specific client in mind. Kindly seek professional advice specific to your situation. You may also reach out to your usual Balogun Harold contact or contact us via support@balogunharold.com for support.
[1] Generation or carrying capacities of less than 500kW do not generally require licenses.
