Electricity generation started in Nigeria in 1896 but the first electric utility company, known as the Nigerian Electricity Supply Company, was established in 1929. By the year 2000, a state-owned monopoly, the National Electric Power Authority (NEPA), was in charge of the generation, transmission and distribution of electric power in Nigeria.
It operated as a vertical integrated utility company and had a total generation capacity of about 6, 200 MW from 2 hydro and 4 thermal power plants. This resulted in an unstable and unreliable electric power supply situation in the country with customers exposed to frequent power cuts and long period of power outages and an industry characterised by lack of maintenance of power infrastructure, outdated power plants, low revenues, high losses, power theft and non-cost reflective tariffs.
In the year 2001, the reform of the electricity sector began with the promulgation of the National Electric Power Policy which had as its goal the establishment of an efficient electricity market in Nigeria. It had the overall objective of transferring the ownership and management of the infrastructure and assets of the electricity industry to the private sector with the consequent creation of all the necessary structures required to forming and sustain an electricity market in Nigeria.
In 2005 the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria. In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises of the 18 successor companies (6 generation companies, 11 distribution companies and 1 transmission company) created from NEPA.
In 2O10, the Nigerian Bulk Electricity Trading Plc (NBET) was established as a credible off-taker of electric power from generation companies. By November 2013, the privatisation of all generation and 10 distribution companies was completed with the Federal Government retaining the ownership of the transmission company. The privitisation of the 11th distribution company was completed in November 2014.