Electricity Reform: FG Mulls Sale of 11 Underperforming Discos

The Federal Government could initiate a reprivatisation process of the country’s 11 electricity distribution companies (Discos) if the proposed 2025 Electricity Act Amendment currently under consideration by the National Assembly is passed into law.

The amendment seeks to overhaul the existing 2023 Electricity Act by introducing regulatory provisions that require core investors in the Discos to inject new capital into the sector within 12 months. Failure to comply could lead to share dilution, receivership, or outright re-privatisation.

Sponsored by Senator Enyinnaya Abaribe, the bill aims to address persistent inefficiencies in Nigeria’s power sector by empowering the Nigerian Electricity Regulatory Commission (NERC) to take decisive action against poorly performing distribution firms.

The legislation proposes the development of a comprehensive financing framework that would attract long-term, local currency investments and phase out unstructured subsidies. The framework is expected to focus on optimising gas-to-power projects, supporting distributed energy systems, and strengthening the financial base of Discos.

Under Sections 228J and 228K of the proposed bill, the Minister of Power, in collaboration with NERC, will be required to implement measures to de-risk investment across the power value chain and resolve the sector’s growing debt crisis, currently estimated at over N4 trillion.

Core investors in the Discos will be mandated to recapitalise their equity holdings within a 12-month window or face regulatory sanctions, including loss of ownership. The Act also requires a clear determination of the equity contributions of both federal and state governments to the Discos.

The reform measure comes amid increasing concerns over the poor performance of the Discos, which continue to struggle with service delivery despite receiving significant financial support, including bailouts and tariff adjustments. In May, the Minister of Power publicly criticised the Discos for underperformance and warned that continued inaction would no longer be tolerated.

A report by the Bureau of Public Enterprises in May 2025 revealed that over 70% of the Discos have failed to meet performance benchmarks agreed upon at the time of privatisation in 2013.

Stakeholders have expressed mixed reactions to the bill. While some industry experts support the recapitalisation effort, they caution that a 12-month deadline may be unrealistic given the current economic climate. Many are calling for an extension to 24 months, drawing parallels with the Central Bank of Nigeria’s past recapitalisation programme in the banking sector.

Others argue that the success of the proposed framework will depend on the resolution of long-standing financial issues in the sector, including unpaid subsidies and the absence of cost-reflective tariffs. Without these, they warn, investor confidence could remain low.

Despite concerns, proponents of the bill believe it will enforce accountability and help stabilise Nigeria’s power sector, which remains burdened by inadequate infrastructure and financial mismanagement.

Meanwhile, restructuring plans are already in motion. The Ministry of Power has begun deploying specialised teams to some of the most underperforming Discos as part of a broader reform initiative. A pilot programme targeting two Discos, one in the north and one in the south is currently underway and is expected to conclude by August 2025.

Authorities have promised to provide updates as the implementation progresses, emphasising that the reform is critical to reviving Nigeria’s electricity distribution system and attracting sustainable investment into the sector.