The federal government has disclosed plans to restructure electricity distribution companies (DisCos) over their continued financial instability and unwillingness to make critical investments in the sector.
Minister of Power, Adebayo Adelabu, stated this on Thursday in Abuja during the public presentation of the National Integrated Electricity Policy.
He noted that DisCos have consistently underperformed and remain unable to attract financing from the banking sector due to their weak balance sheets.
“This is why we are going to focus on the DisCos this year and carry out a lot of restructuring. They are not ready to make more investments, and their balance sheets are not healthy enough to even attract debts from the finance sector,” Adelabu said.
He noted that despite being advised to adopt franchising as a strategy to improve underperforming feeders, none of the DisCos has implemented the measure. The minister said there is a need for regulatory intervention to ensure that the companies take steps to strengthen their financial positions and fulfill their obligations to consumers.
The government is also considering a tariff regularization framework to address the significant disparity in electricity pricing across consumer bands.
Adelabu highlighted concerns over the wide gap between Band A consumers, who pay ₦209 per kilowatt-hour for 20 hours of power supply and Band B consumers, who pay ₦63 per kilowatt-hour for 17 to 18 hours of supply.
“We will look at the tariff again. I am not saying that we are going to increase the tariff. What we want to do is to regularize it in a way that ensures fairness across the bands while sustaining the sector’s financial viability,” he said.
The challenges facing the power sector extend beyond the DisCos as the federal government’s debt to electricity generation companies (GenCos) and DisCos has now surpassed ₦4 trillion.
According to the minister, GenCos are owed over ₦2 trillion while the outstanding electricity subsidy for 2024 stands at ₦1.97 trillion. An additional ₦450 billion is owed to DisCos for unpaid subsidies.
“One of the major issues concerning liquidity is the huge debt in the sector. How do you expect the GenCos to perform optimally? How do you expect them to pay for gas, services, and the maintenance of their turbines when over ₦4 trillion is being owed to them?” Adelabu said.
He noted that more than 60% of Nigeria’s manufacturing firms have disconnected from the national grid, opting for self-generation due to unreliable supply.
The federal government’s planned intervention signals a renewed push for reforms aimed at improving financial stability in the electricity sector, ensuring DisCos fulfill their investment obligations and addressing long-standing structural inefficiencies in power distribution across the country.
