FG May Re-Privatise Underperforming Power Distribution

The Nigerian government is considering a major shake-up in the electricity sector that could lead to the sale of the country’s 11 power distribution companies if they fail to attract new investments. This bold step is embedded in the proposed Electricity Act (Amendment) Bill, 2025, which is currently being debated in the National Assembly.

The bill, championed by Senator Enyinnaya Abaribe of Abia South, seeks to update the existing 2023 Electricity Act by introducing stricter accountability measures for operators in the electricity distribution space. Under the new bill, private investors who fail to improve performance or bring in new capital within a year could lose their stake in the Discos.

According to the draft seen by The PUNCH, the amendment would empower the Nigerian Electricity Regulatory Commission (NERC) to either dilute the shares of non-performing investors, take over their operations through receivership, or fully re-privatise the companies. The move is expected to target firms currently in financial distress or operating under government-appointed receivers.

Nigeria’s 11 electricity distribution companies, which were privatised in 2013, have struggled for over a decade to deliver reliable power supply. Despite receiving multiple lifelines ranging from financial bailouts to debt forgiveness, the Discos have largely failed to meet performance benchmarks.

Minister of Power, Adebayo Adelabu, recently expressed strong disappointment in their track records. “We have invested trillions of naira into the sector, but most Nigerians are still in the dark,” he lamented during a press briefing in May. “If you can’t invest and improve performance, step aside for those who can.”

This growing frustration has pushed the government to consider tougher measures. The proposed law gives NERC sweeping powers to enforce recapitalisation and sanction non-compliant investors. The bill stipulates that core investors must inject fresh capital into their companies within 12 months of the law being enacted or risk losing control.

Among its many provisions, the Electricity Amendment Bill mandates the creation of a comprehensive financing framework for the Nigerian Electricity Supply Industry. This framework, to be developed jointly by the Minister of Power and NERC, must be ready within one year and focus on attracting long-term local currency investments, de-risking projects across the electricity value chain from generation to distribution, eliminating heavy reliance on costly diesel and petrol-based power generation, and phasing out inefficient government subsidies.

Sections 228J and 228K of the amendment spell out the obligations of core Disco investors. These include recapitalising their equity shares and complying with financial health indicators. Non-compliance could trigger severe penalties such as enforced share dilution or re-privatisation by the federal government.

The bill also calls for clarity in the ownership structure of Discos. Both federal and state governments are to determine their equity stakes in the firms within 12 months and must make capital contributions proportionate to their holdings.

In addition, the financing framework would offer fiscal and tax incentives to attract private capital, especially for gas-to-power and distributed energy projects. A cost-reflective and transparent tariff regime is also proposed to ensure operators can recover investments without relying on government subsidies.

As expected, the amendment has stirred debate across Nigeria’s power sector.

The Forum of Commissioners of Power and Energy voiced concerns that the bill could reverse decentralisation efforts embedded in the 2023 Electricity Act, thereby discouraging state-level innovation and private sector participation.

Meanwhile, representatives from the Discos, speaking anonymously, acknowledged that the bill, once signed into law, would be binding. “There’s no question of resisting it,” one official told The PUNCH. “What matters now is working collectively with stakeholders to implement the provisions responsibly.”

The Discos seem open to the stronger regulatory role proposed for NERC, as long as the implementation is done transparently and fairly.

Energy experts have also weighed in. Chinedu Amah, a power sector analyst, argued that the real problem isn’t a lack of policy, but failure to implement existing ones. “We have enough frameworks already,” he said. “The challenge has always been execution.”

Amah advocated for removing subsidies and allowing the market to determine electricity prices. He also stressed the need for critical infrastructure investments, noting that no matter how much you push Discos to invest, if the government doesn’t fix underlying issues, progress will stall.

Habu Sadiek, another analyst, welcomed the amendment but warned that recapitalisation must be preceded by two key steps: clearing outstanding subsidy debts and allowing cost-reflective tariffs. He also criticised the 12-month recapitalisation deadline as unrealistic, suggesting a 24-month window instead, similar to the Central Bank’s banking sector reforms.

In the meantime, the Federal Ministry of Power is already working on a pilot reform project targeting two of the underperforming Discos. One company from the North and another from the South have been selected for restructuring, with support from the Japanese International Cooperation Agency (JICA), which has presented a roadmap titled “Revamping of the Distribution Sector in Nigeria.”

The programme, scheduled to wrap up by August 2025, aims to test new models of Disco management and investment attraction. Minister Adelabu’s spokesperson, Bolaji Tunji, confirmed that the restructuring effort is ongoing and that the ministry would provide updates soon.

Nigeria’s electricity distribution sector stands at a crucial crossroads. While the privatisation of the Discos over a decade ago was meant to usher in a new era of efficiency and customer satisfaction, the reality has fallen short of expectations. The Electricity Act (Amendment) Bill, 2025 could mark a turning point, either by compelling investors to shape up or by paving the way for more capable hands.

With its mix of accountability, investment incentives, and regulatory oversight, the new bill presents a serious attempt to address the sector’s many shortcomings. Whether it leads to real transformation or adds to Nigeria’s pile of under-implemented policies will depend on political will and execution in the months ahead.