Electricity Market Reform and Renewable Energy Investment in Nigeria: Transaction Cost and Regulatory Theory Perspectives

Nigeria's electricity market reform process, initiated under the Electric Power Sector Reform Act 2005 and significantly accelerated by the Electricity Act 2023, has created an evolving regulatory architecture whose transaction cost implications for renewable energy investment represent an undertheorised dimension of energy market reform scholarship in sub-Saharan Africa. This study investigates the relationship between electricity market reform and renewable energy investment in Nigeria through transaction cost theory and regulatory theory perspectives, making an original theoretical contribution by developing a Regulatory Transaction Cost model for renewable energy markets in reforming African electricity sectors. The research employs a mixed-methods design combining econometric analysis of renewable energy investment data across reform phases, systematic content analysis of regulatory instruments, and 55 semi-structured interviews with investors, legal advisers, and regulatory officials spanning the full period from 2005 to 2024. The Regulatory Transaction Cost model distinguishes between search and information costs, negotiation and contracting costs, monitoring and enforcement costs, and regulatory risk costs as distinct components of transaction costs borne by renewable energy investors, and analyses how each cost category has evolved across reform phases. Empirical findings demonstrate that while statutory reform has reduced information and negotiation transaction costs, monitoring and enforcement costs remain prohibitively high due to power purchase agreement payment default risks and grid connection commitment failures, explaining the persistent gap between contracted and commissioned renewable energy capacity. The study proposes a transaction cost-minimising regulatory architecture for Nigeria's electricity market. Keywords: electricity market reform, transaction cost theory, renewable energy investment, Nigeria, regulatory theory.