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The Federal Government may proceed with the sale of 11 power distribution companies through a re-privatization process if the Electricity Act (Amendment) Bill, 2025, which is currently before the National Assembly, is enacted.
The National Assembly has initiated a legislative process aimed at implementing significant reforms that could lead to core investors in electricity distribution companies losing their shares if they do not enhance their investments.
Sponsored by Senator Enyinnaya Abaribe (Abia South), the amendment bill aims to revise the 2023 Electricity Act to fill regulatory gaps, indicating that investors may lose their shares through dilution, receivership, or complete re-privatization if new capital is not injected into the sector within 12 months, following years of inadequate performance and an escalating debt crisis.
This provision will take effect immediately after the ongoing amendment to the Electricity Act 2023 is approved. The bill has successfully passed its second reading and is undergoing further legislative review and discussion.
If enacted into law, this will empower the Nigerian Electricity Regulatory Commission (NERC) to require core investors in the 11 successor distribution companies (Discos) to contribute new capital or face strict regulatory measures, including share dilution, receivership, or complete re-privatization.
This information was disclosed in the draft amendment to the Principal Act.
Concerns have already been raised about the proposed Electricity Act (Amendment) Bill, 2025, by the Forum of Commissioners of Power and Energy, which contends that the bill threatens the newly decentralized electricity market in the country and could undo key reforms accomplished under the significant Electricity Act of 2023.
The bill would also grant the commission the authority to impose sanctions, including share dilution or re-privatization, on Discos that fail to comply, especially those in financial distress or receivership.
Nigeria has 11 Discos serving various regions, including Abuja, Benin, Eko, Enugu, and Ibadan Electricity Distribution Companies, as well as others like Ikeja, Jos, Kaduna, Kano, Port Harcourt, and Yola Electricity Distribution Companies. Under the new legislation, a comprehensive framework must be established within 12 months to reform the financial structure of the Nigerian Electricity Supply Industry, focusing on attracting long-term local currency investments and phasing out "unstructured and regressive subsidies".
Sections 228J and 228K of the amended Act require the Minister of Power, in collaboration with NERC, to create and implement a solid financing framework aimed at reducing investment risks across the power value chain and addressing the sector's chronic debt, estimated at over N4 trillion.
However, experts in the power sector and consumer advocacy groups argue that for the proposed law to be effectively implemented, long-standing subsidy debts that burden the sector must first be cleared.
They recommend extending the recapitalization period to 24 months, akin to the approach taken during the banking sector's recapitalization, to allow for a more realistic and organized transition.
The amended act specifies the establishment of a financing framework for projects in the Nigerian Electricity Supply Industry (NESI) within 12 months from the bill's commencement.
This framework is to align with the existing National Electricity Policy and Strategic Implementation Plan and aims to attract and minimize investment risks across the power value chain, tackle diesel and petrol-based self-generation, and alleviate severe financial crises and debt issues in the power sector.
The proposed Act stipulates prioritizing long-term local currency financing for gas-to-power and distributed energy projects, ensuring a transparent and predictable tariff regime that supports cost recovery, facilitating the recapitalization of Discos under NERC's oversight, clearly determining federal and state equity stakes in the Discos, and offering fiscal and tax incentives to lure investment and avert a sector collapse.
The framework outlined in section 228I of this bill is to include, among other things: long-term local currency capital financing for gas-to-power optimization projects and distributed energy projects designed to mitigate foreign exchange risks for investors; a commitment to a transparent and predictable tariff regime that permits cost recovery for efficient operators, and the systematic phasing out of regressive and unstructured subsidies.
Moreover, certain power plants within the Niger Delta Power Holding portfolio may be conceded, alongside the initiation and completion of the recapitalization of successor Discos under the directive of the Nigerian Electricity Regulatory Commission.
The regulatory commission will have the authority to direct core investors in the 11 successor distribution companies, including those under receivership, to recapitalize their equity holdings within 12 months from the bill's commencement.
In deserving cases, appropriate penalties for non-compliance may be imposed under this subsection, including share dilution or re-privatization.
The act will also determine the Federal Government's equity stakes in the successor distribution companies with a clear deadline of no later than 12 months from the commencement of the bill, ensuring both federal and state governments contribute proportional to their equity interests in the 11 distribution companies.
It includes other mechanisms, like fiscal and tax incentives, to prevent the collapse of the NESI. The commission will consult widely and implement measures to ensure that the enforcement of any order concerning recapitalization does not disrupt service continuity or undermine investor confidence in the NESI.
The government's firm stance follows years of inadequate performance by the Discos, which provide sporadic power supply despite multiple interventions, including debt relief, financial bailouts, and tariff adjustments.
In May, the Federal Government publicly expressed its disappointment with the Discos, accusing them of obstructing ongoing reforms.
At a media briefing in Abuja, the Minister of Power, Adebayo Adelabu, lamented that despite substantial investments in the sector, many Nigerians remain without electricity.
"The performance of the Discos has been severely lacking," Adelabu asserted. "We can no longer accept excuses. If you can't invest, step aside for those who can."
Adelabu emphasized the necessity of being firm with the Discos, as they could easily undermine all the progress made.
"They have let us down in terms of performance expectations. Any improvements in generation mean nothing to consumers if blocked at the distribution points."
According to a May 2025 report by the Bureau of Public Enterprises, over 70 percent of Discos have failed to meet crucial performance standards set during the 2013 privatization process.
In response to the proposed timeline and upcoming directive, an official from the power distribution companies dismissed concerns about the recently amended Electricity Act's effect on Discos, stating that the law becomes binding upon assent and must be adhered to by all parties involved.
The official, who chose to remain anonymous due to lack of authorization to comment, remarked that the focus should be on compliance and cooperation rather than opposition.
"It's irrelevant to claim that the law impacts Discos. Once the National Assembly enacts a law, it binds all of us. Our collective focus should be on implementation and adherence to the law," the official stated.
The source highlighted that the amendments empower NERC, a change that the Discos are willing to support.
"The regulatory commission possesses its powers, and any amendment strengthening those powers is welcome. We trust the National Assembly's judgment to amend the law, and we are ready to collaborate with all stakeholders to ensure its implementation," they added.
Electricity market expert Chinedu Amah noted that the issues facing the electricity sector stem not from a lack of policies but rather from an inability to effectively implement existing frameworks.
"Nigeria is already inundated with policies and proposals; we've reached a point of policy overload," the expert remarked. Sponsored Stories "It is not a problem of policy as much as it is about establishing effective implementations."
He added that while distribution companies bear the responsibility of expanding the grid and investing in infrastructure, discussions must extend beyond mere obligations.
"Merely stating that Discos need to invest isn't enough. We cannot force them to grow their businesses, but critical infrastructure gaps must be addressed by the government, private sector, or through partnerships," the official remarked.
Conversely, another power sector analyst, Habu Sadiek, called attention to critical prerequisites for the initiative's success.
Responding to the recent amendments in the Electricity Act, Sadiek welcomed the plan but underscored the importance of the government first addressing outstanding financial issues within the sector.
"This is a positive move," he stated. "However, the government must focus on two actions before launching a recapitalization program: settle all pending subsidy payments and permit cost-reflective tariffs to prevail." According to him, without resolving these matters, the recapitalization effort may not yield the desired outcomes.
He also criticized the proposed 12-month timeline for the Discos to recapitalize, arguing it was overly brief and unrealistic given the current economic pressures.
"Extending the deadline to 24 months, much like the Central Bank of Nigeria's recapitalization program, would have been more reasonable," Sadiek observed.
Attempts to solicit comments from NERC on the issue were unsuccessful as the Director of Public Affairs, Usman Arabi, was unreachable. Meanwhile, Minister of Power, Adebayo Adelabu, confirmed active plans to deploy special teams to low-performing power distribution companies as part of a broader restructuring initiative.
It is recalled that in May 2025, the ministry announced an extensive overhaul of the power distribution sector, starting with a pilot reform program targeting two underperforming electricity distribution companies.
Scheduled to take place between May and August 2025, the pilot will involve one Disco each from the northern and southern regions of the country.
This restructuring plan follows a meeting with the Japanese International Cooperation Agency, which presented a roadmap titled "Revamping of the Distribution Sector in Nigeria."
In providing an update on the process, which is set to conclude next month, the Special Adviser on Strategic Communications and Media Relations to the minister, Bolaji Tunji, stated on Monday, "It is an ongoing process, and we will provide updates at the appropriate time."
