Reforming Board Governance in Nigeria’s Power Sector: NERC’s Two-Board-Limit Directive.

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The Nigerian Electricity Regulatory Commission (NERC) has taken a significant step to strengthen corporate governance in the electricity industry. In a recent directive, NERC has barred any individual from holding board positions in more than two companies operating within the power sector. This move has both legal and strategic implications for companies and directors involved in Nigeria’s electricity value chain.

The Rule

NERC’s circular provides that no person shall serve as a director in more than two licensee companies across the sector — whether in generation, transmission, distribution, or trading. The goal is to eliminate overlapping influence, reduce conflict of interest, and enforce a more independent and accountable governance structure within the industry.

Why This Matters

Nigeria’s power sector has long grappled with governance challenges. Overlapping board memberships have contributed to regulatory arbitrage, diluted oversight, insider decision making, and unclear fiduciary responsibilities among others.

In a sector critical to national development, governance must be more than a formality — it must drive performance, compliance, and trust. NERC’s directive echoes this necessity.

Implications for Directors and Companies

  1. Compliance Audit Required
    All electricity companies must immediately review their board compositions. Directors serving on more than two sector boards will need to step down from the excess positions.
  2. Governance Restructuring
    Groups or holding companies with interests across multiple licensees may need to reassign oversight roles, rethink their corporate structure, and ensure each board is independently effective.
  3. Legal Exposure & Enforcement
    Non-compliance may trigger regulatory sanctions or even license reviews. Beyond reputational risk, directors who breach this rule may be seen as compromising fiduciary duties.
  4. Broader Sector Reforms
    This aligns with a pattern seen in other regulated sectors. The CBN, SEC, and PENCOM have imposed similar restrictions in their various areas of oversight. These measures have signalled a definite shift toward substantive, rather than symbolic, board oversight.

The Bigger Picture: Better Boards, Stronger Sector

This move could be a game-changer. Power sector boards have historically served as overlapping circles of influence, sometimes making it difficult to enforce accountability or separate public interest from private interest.

By limiting board seats:

  • Directors can give more focused attention to fewer companies.
  • Stakeholders benefit from fresher perspectives and less groupthink.
  • The regulator can better ensure compliance and integrity in board decisions.

NERC’s two-board rule should definitely be viewed as more than a technical compliance issue — it’s a reminder that governance is the backbone of any high-performing industry. Directors are not figureheads; they are fiduciaries. And in a sector as critical as power, even board composition is a matter of national importance.

While this restriction marks an important step toward improved governance in the Nigerian power sector, it is by no means exhaustive. The sector still requires comprehensive governance reforms, including enforceable codes on board independence, transparency, and accountability. For Nigeria’s electricity industry to gain investor confidence and align with global standards, NERC must continue to drive structural governance improvements beyond this directive.

Is Your Company Compliant?

Now is the time to:

  • Review your board structure
  • Conduct a corporate governance audit
  • Reassess director roles in light of regulatory expectations

If your organization needs legal support in navigating this reform or restructuring its governance approach, let’s have a conversation.

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