Repositioning And Promoting Energy Investments Between South Africa And Nigeria

1. INTRODUCTION

Nigeria and South Africa remain two of Africa’s most significant energy markets, with substantial natural resources, sophisticated financial ecosystems, and growing ambitions to lead the continent’s evolving energy economy. However, despite their strategic importance, the full potential for cross-border energy investment and collaboration between both jurisdictions remains largely untapped. As Africa navigates energy security concerns, industrialisation, and the global energy transition, stronger regional cooperation between the two countries has become increasingly important.

Recent reforms in both jurisdictions have further strengthened this opportunity. Nigeria’s Petroleum Industry Act, 2021 and broader efforts to liberalise its energy sector are aimed at attracting long-term investment across oil, gas, and renewable energy value chains. Similarly, South Africa’s ongoing electricity market reforms and renewable energy initiatives continue to reshape its investment landscape.

Based on this premise, this article examines the legal and regulatory frameworks governing energy investments in Nigeria and South Africa, the opportunities and challenges shaping cross-border participation, and how both countries can deepen collaboration to foster a more integrated and investment-friendly African energy market.

2. SETTING THE SCENE: WHY NIGERIA AND SOUTH AFRICA?

Nigeria and South Africa jointly account for one-third of sub-Saharan Africa’s GDP, with their GDPs roughly $188 billion and $400 billion, respectively, in 2024.¹ Nigeria holds the largest proven crude oil reserves on the continent — estimated at 37.50 billion barrels — and has a production capacity of approximately 2.19 million barrels per day (mbpd),² but currently produces an average of 1.71 million bpd³. It is endowed with natural gas reserves of approximately 209.26⁴ trillion cubic feet, ranking among the top ten globally. South Africa, although with significant coal deposits, is at the frontier of renewable energy development on the continent, driven primarily by its Renewable Energy Independent Power Producer Procurement Programme (the “Renewable Energy Programme”).⁵ Despite this alignment, bilateral energy investment between our two countries is still in its early stages. The African Union’s Agenda 2063 and the African Continental Free Trade Area (AfCFTA) framework provide the foundation for deeper integration.⁶ However, in practice, legal harmonisation, regulatory predictability, and investor protection mechanisms remain significant obstacles. It is these obstacles and how we surmount them that I wish to address this morning.

3. THE LEGAL FRAMEWORKS

3.1. A Review of Nigeria’s Regulatory Energy Landscape

3.1.1. The Petroleum Industry Act

One of the most transformative developments in Nigeria’s energy sector in recent years is the enactment of the Petroleum Industry Act (PIA) 2021. The PIA consolidated decades of fragmented petroleum legislation, reestablishing the Nigerian National Petroleum Corporation (NNPC) as a commercially oriented entity, the Nigerian National Petroleum Company Limited (NNPC Ltd), and creating the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), as regulators for the industry. The PIA also introduced a revised fiscal regime, gradually replacing the Petroleum Profits Tax with a Hydrocarbon Tax, graduated by terrain and asset vintage, with rates ranging from 15% to 30%.

The PIA further provides a statutory framework for gas commercialisation, further addressing the longstanding menace of gas flaring through financial penalties and incentive provisions for domestic gas supply obligations, a critical inducement for gas-to-power investment. Additionally, the PIA and its regulations provide for domestic crude supply obligations to serve local refineries and market to satisfy the energy needs of Nigerians.

3.1.2. Electricity Act 2023

Complementing the PIA is the landmark Electricity Act 2023 (the “Act”), which repeals the Electric Power Sector Reform Act, 2005, and consolidates the entire legal and institutional framework for the Nigerian Electricity Supply Industry (NESI). The Act establishes the Nigerian Electricity Regulatory Commission (“NERC”) as the apex regulator of the NESI, with expanded powers to license and regulate persons engaged in electricity generation, transmission, system operation, distribution, supply, and trading across the full value chain.

The Act also mandates the Transmission Company of Nigeria (TCN) to incorporate an Independent System Operator (ISO), to be licensed by NERC, to perform market and system operation functions separately from the transmission function, a structural reform designed to improve market transparency and attract private capital into the transmission infrastructure. Critically for investors, section 112 of the Act expressly permits public-private partnerships between Federal and State governments and private companies for investment in the national transmission grid.

For project finance practitioners, the Act introduces distribution franchising arrangements, enabling third parties to operate within a distribution licensee’s network under NERC-approved terms, creating a new class of investable opportunity particularly suited to last-mile electrification in underserved communities.

Additionally, the Act gives direct legislative effect to the constitutional reform assented to by President Muhammadu Buhari on 17th March 2023.⁷ This amendment deleted the restrictive phrase “not covered by a national grid system” from paragraph 14(b) of the Concurrent Legislative List in Part II of the Second Schedule to the Constitution, thereby conferring on State Houses of Assembly, the unfettered power to make laws for the generation, transmission, and distribution of electricity across all areas within their respective states, including areas already connected to the national grid. The Act operationalises this constitutional shift by establishing the State Electricity Regulators (SERs)⁸ as co- regulatory authorities alongside NERC, creating a two-tier regulatory framework for the electricity market for the power sector.

3.1.3. The Mini-Grid Regulation 2026

The most recent and consequential regulatory development in the space is the Mini-Grid Regulations 2026⁹ (the “Regulation”) issued by the NERC on the 10th April 2026 in exercise of its powers under section 226 of the Electricity Act, 2023 representing a significant evolution in the Nigeria’s decentralized electricity framework. The Regulation intends to reduce regulatory uncertainty, improve the bankability of mini-grid investments, and accelerate the deployment of off-grid electricity solutions in underserved communities.

A key feature of the Regulation is the introduction of two categories of mini-grid: isolated mini-grids, which operate independently of DisCo networks, with a capacity ceiling of up to 5MW; and interconnected mini-grids, which are connected to and coordinated with existing distribution infrastructure, with a capacity ceiling of up to 10MW. The Regulation establishes clearer rules on tariff setting, cost recovery mechanisms, and compensation structure, reducing prior uncertainties that affected investors' confidence.

The Regulation also provides a more predictable and realistic commercial environment for operators by strengthening licensing and registration processes, clarifying technical and operational standards, and reinforcing consumer protection obligations. For example, operators may, subject to the NERC’s approval, expand allowable technical and non-technical losses beyond the 4% and 3% allowances, respectively, by providing evidence relating to such losses, and provided such losses fall under any of the allowable justifications.

The Regulation expands regulatory considerations for project development site exclusivity. Notably, developers are expressly prohibited from transferring exclusivity agreements, and the Regulation stipulates the documents and information that must now accompany an application to register an exclusivity agreement, failing which the NERC will not accept the agreement for registration.

3.1.4. Renewable Energy

Nigeria’s renewable energy regulatory framework, while still maturing, has developed significantly across three intersecting instruments. The NERC Regulations on Feed-In Tariff for Renewable Energy Sourced Electricity in Nigeria (REFIT) 2015, which entered into force in February 2016, provide a guaranteed price framework for electricity generated from wind, hydro, biomass, and solar photovoltaic sources with a capacity between 1MW and 30MW connected to the grid or distribution network.¹⁰

The National Renewable Energy and Energy Efficiency Policy (NREEEP), approved by the Federal Executive Council in 2015, constitutes the overarching policy framework. It establishes a target for developing power generation through renewables and energy efficiency, sets out the framework for removing regulatory and economic barriers, and requires the establishment of renewable energy units at both the federal and state levels to coordinate policy implementation.

3.2. A Review of South Africa’s Regulatory Energy Landscape

The Electricity Regulation Act 4 of 2006 (ERA) governs the generation, transmission, distribution, import, and export of electricity in South Africa. The ERA establishes the most important energy regulatory framework in South Africa. The National Energy Regulator of South Africa (NERSA) acts as the primary regulatory authority, with jurisdiction over licensing, tariff approval, and compliance monitoring. The ERA was recently amended by the Electricity Regulation Amendment Act 38 of 2024 (ERAA), establishing the framework for a competitive electricity market.¹¹

The Mineral and Petroleum Resources Development Act (MPRDA) 28 of 2002 governs South Africa’s upstream petroleum sector. The MPRDA vests all mineral and petroleum resources in the State of South Africa as a custodianship for the benefit of all South Africans, and as a custodian, the State has the power and right to require that investors obtain reconnaissance permits, technical cooperation permits, exploration rights, or production rights, each subject to a prescribed application process and fiscal obligations.¹²

South Africa’s Renewable Energy Programme, launched in August 2011, has been globally lauded as a model for structuring renewable energy procurement. It has successfully channelled substantial private sector expertise and investment into grid-connected renewable energy in South Africa at competitive prices, demonstrating that a well-structured legal and procurement framework can unlock capital at scale.¹³

3.3. The Intersection: ECOWAS Energy Protocol and SADC Energy Frameworks

3.3.1. A structural challenge for South Africa-Nigeria bilateral energy investment is the absence of a shared regional energy treaty. Nigeria sits within the ECOWAS framework, which provides principles on energy trade and investment protection within the West African region, while South Africa operates within the Southern African Development Community (SADC) framework, governed by the SADC Protocol on Energy of 1996, as revised.¹⁴

3.3.2. It is worth noting that the ECOWAS Energy Protocol is not without teeth. Modelled closely on the Energy Charter Treaty, it provides substantive investment protections – fair and equitable treatment, protection against expropriation without compensation, and critically, access to investor-state dispute settlement. Thirteen of the fifteen ECOWAS member states have ratified the Protocol, and it has entered into force. However, the enforcement architecture remains underdeveloped in practice: the ECOWAS Regional Electricity Regulatory Authority (ERERA) is still in the process of designing binding dispute-resolution and enforcement rules, meaning that investor predictability remains aspirational rather than guaranteed. The Protocol is also now widely acknowledged, including by ECOWAS itself, to require revision to align with more recent instruments such as the AfCFTA Protocol on Investment and to better balance investor rights with sustainable development obligations.

3.3.3. The more fundamental structural challenge, however, is one of jurisdictional design. The ECOWAS Energy Protocol governs investment flows among ECOWAS member states — it was not conceived to regulate cross-regional investment between West Africa and Southern Africa.

3.3.4. The SADC Protocol on Energy, similarly, operates as an intra-SADC framework and has no mechanism for engaging with non-SADC investors or states. A Nigerian energy company investing in South Africa’s renewable sector, or a South African utility seeking to participate in Nigeria’s gas-to-power value chain, falls entirely outside the protective scope of both instruments. Such an investor must independently navigate two distinct licensing regimes, local content frameworks, foreign exchange obligations, and dispute resolution pathways — none of which were designed with cross-regional South-South investment in mind.

3.3.5. The AfCFTA Protocol on Investment, although adopted but not yet in force, holds genuine promise as a continental bridge. Once operationalised, it is intended to provide a unified framework for investment protection, market access, and dispute resolution across AfCFTA member states — encompassing both Nigeria and South Africa. However, in the interim, investors operating across both jurisdictions must navigate two parallel regulatory regimes, often with divergent standards on dispute resolution, expropriation, and technology transfer. This gap underscores the urgency of the recommendations I will set out later in this address.

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Footnotes

1. Council on Foreign Relations, Economics: Sub-Saharan Africa (2025) https://education.cfr.org/learn/reading/economics-sub-saharan-africa accessed 13 April 2026.

2. OPEC, Annual Statistical Bulletin 2023 (OPEC 2023) (https://www.opec.org/opec_web/en/publications/338.htm) accessed 13 April 2026; Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria: Leading Crude Oil Producer in Nigeria (2024) https://www.nuprc.gov.ng/nigeria-leading-crude-oil-producer-in-africa/ accessed 13 April 2026.

3. Gwamkat Gwamzhi, “Oil production recovers to 1.71m bpd average – NNPC”, (April 2026, Radia Nigeria), https://radionigeria.gov.ng/2026/04/08/oil-production-recovers-to-1-71m-bpd-average-nnpc/, accessed 15 April 2026.

4. Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s Oil and Gas Reserves Soar: NUPRC Unveils Impressive Figures (2024) https://www.nuprc.gov.ng/nigerias-oil-and-gas-reserves-soar-nuprc-unveils-impressive-figures/ accessed 13 April 2026.

5. Department of Mineral Resources and Energy (DMRE), Renewable Energy Independent Power Producer Procurement Programme (REIPPPP): IPPPP Quarter 3 Report (DMRE/IPP Office 2023) https://www.dmre.gov.za/Portals/0/Resources/Publications/Reports/IPPPP/IPPPP-Quarter3-Report-as-at-31December2023.pdf accessed 13 April 2026.

6. African Union, Agenda 2063: The Africa We Want (African Union Commission 2015) (https://au.int/en/agenda2063/overview) accessed 13 April 2026; Agreement Establishing the African Continental Free Trade Area (AfCFTA), adopted 21 March 2018, entered into force 30 May 2019 (https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf) accessed 13 April 2026.

7. The Constitution of the Federal Republic of Nigeria, 1999 (Fifth Alteration) (No. 17) Act, 2023.

8. Section 2(2)(c) of the Electricity Act, 2023.

9. Mini-Grid Regulations 2026 https://nerc.gov.ng/wp-content/uploads/2026/04/Mini-Grid-Regulations-2026.pdf

10. Section 4 (ii)(b), Nigerian Electricity Regulatory Commission (NERC), Regulations on Feed-In Tariff for Renewable Energy Sourced Electricity in Nigeria (REFIT) 2015.

11. Electricity Regulation Act 4 of 2006 (South Africa) Government Gazette 28992 of 5 July 2006, ss 3, 4, 15; See also Mondaq, The Electricity Regulation Amendment Act And South Africa’s New Era of Electricity Market Transformation https://www.mondaq.com/southafrica/oil-gas-electricity/1585856/the-electricity-regulation-amendment-act-and-south-africas-new-era-of-electricity-market-transformation accessed 14 April 2026.

12. Mineral and Petroleum Resources Development Act 28 of 2002 (South Africa) ss 3, 69–84.

13. World Bank Group, South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons https://openknowledge.worldbank.org/server/api/core/bitstreams/74a79bb1-6b50-5058-a614-7154f6df73df/content accessed 14 April 2026

14. SADC Protocol on Energy, signed 24 August 1996, Protocol_on_Energy1996.pdf

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