FG: DisCos under-capitalised, burdened by heavy debt

The Federal Government has announced a new policy mandating electricity Distribution Companies (DisCos) to meet a minimum capital adequacy requirement as a condition for the renewal of their operational licenses.

Minister of Power, Adebayo Adelabu, disclosed this while delivering the keynote address at the Nigeria Energy Forum held at the Landmark Centre, Lagos, themed “Powering Nigeria through Investment, Innovation, and Partnership.”

Adelabu explained that several DisCos remain under-capitalized and burdened by heavy debt, making financial reform essential to the sector’s sustainability.

“As the tenure of their operational licenses approaches renewal, the government intends to introduce a minimum capital adequacy requirement to strengthen the financial health and liquidity position of the utilities,” he said.

The minister outlined a comprehensive reform agenda designed to reposition the Nigerian power sector for efficiency, growth, and long-term stability.

He said the reforms span key areas such as legislation, policy overhaul, infrastructure development, energy access, transition, and local capacity building.

Adelabu identified the Electricity Act 2023 as a milestone achievement, granting regulatory autonomy to 15 states, and noted that the newly approved Integrated National Electricity Policy — the first in nearly two decades — signals a major shift toward a liberalized, investment-friendly electricity market.

“Since its passage, 15 states have received regulatory autonomy to establish subnational electricity markets, with one already fully operational.

“We are working with these states to align retail and wholesale markets and ensure coordination with the Rural Electrification Agency’s initiatives,” he stated.

To stabilize the market and promote commercialization, Adelabu said the government is strengthening tariff reforms that enable cost-reflective pricing for select consumers, improving supply reliability and industry liquidity.

He revealed that industry revenue rose by 70 percent to ₦1.7 trillion in 2024, with projections to exceed ₦2 trillion in 2025, driven by improved supply and tariff adjustments.

In a major financial intervention, President Bola Tinubu has approved a ₦4 trillion bond to clear verified debts owed to Generation Companies (GenCos) and gas suppliers. Additionally, a targeted subsidy framework is being developed to protect low-income households while ensuring a gradual transition to full sector commercialization.

Adelabu also provided updates on key infrastructure projects, including the Presidential Power Initiative (PPI) Phase One, which aims to add 7,000MW of operational capacity to the grid.

He confirmed that average generation capacity rose to 5,300MW in 2024, up from 4,200MW in 2023, driven by the rehabilitation of NIPP plants, the integration of the 700MW Zungeru Hydropower Plant, and ongoing grid expansion efforts.

The Minister further announced the operationalization of the Presidential Metering Initiative, with ₦700 billion secured to deploy 1.1 million meters nationwide by the end of 2025.

Another major milestone, according to Adelabu, is the unbundling of the Transmission Company of Nigeria (TCN) into two entities — the Nigerian Independent System Operator (NISO), which manages grid operations and the electricity market, and the Transmission Service Provider (TSP), responsible for ownership, maintenance, and expansion of transmission infrastructure.

Calling for greater private investment, Adelabu emphasized that Nigeria’s power sector is “open and ready for business more than ever before.”

“We recognize that transforming the sector requires significant private sector participation, particularly in transmission. Nigeria currently has over 10GW of stranded generation capacity — energy that can power industries, create jobs, and even support electricity exports.

“Our market fundamentals are improving, our policies are clear, and our leadership is committed to long-term stability,” he stated.

The minister cited South Africa’s $25 billion transmission grid expansion as an example of large-scale investment that Nigeria seeks to emulate, adding that the country is ready to partner with investors, financiers, and innovators to unlock its vast power potential.