Electricity Act Amendment Bill propose sale of 11 DisCos over capital failure

The Federal Government may initiate a re-privatisation process for Nigeria’s 11 electricity distribution companies (DisCos) if the Electricity Act (Amendment) Bill, 2025, currently under legislative consideration, receives presidential assent.

The proposed amendment introduces far-reaching reforms that could compel underperforming private investors to either inject fresh capital into the power sector or forfeit their ownership stakes.

Sponsored by Senator Enyinnaya Abaribe (Abia South), the bill is a response to the persistent failure of electricity distribution companies to meet service delivery expectations, raise capital for infrastructure upgrades, and address a sector-wide debt burden now estimated at over ₦4 trillion.

The bill, which seeks to amend the landmark Electricity Act of 2023, has already passed its second reading in the Senate and is currently undergoing detailed committee review.

If passed, the amendment will grant the Nigerian Electricity Regulatory Commission (NERC) sweeping powers to enforce financial discipline across the sector.

These powers include directing core investors in the 11 successor DisCos to recapitalise their holdings within a 12-month timeframe or face punitive measures such as share dilution, receivership, or outright sale of their stakes to new investors.

According to the draft seen by Punch, the recapitalisation clause will take effect immediately upon presidential assent. The bill proposes that this 12-month window for fresh capital injection will be non-negotiable and binding across all distribution companies, including those currently under financial distress or regulatory receivership.

The 11 DisCos, operating in various regions across Nigeria, include Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt, and Yola Electricity Distribution Companies.

These companies, privatised in 2013, have long been accused of poor performance, billing inefficiencies, and inadequate customer service, despite receiving intervention funds and tariff adjustments over the past decade.

In its justification, the amendment bill highlights the inability of the current owners of these firms to improve operations, attract investment, or stabilise their financial structures. The government argues that these shortcomings have undermined the objectives of the 2013 privatisation exercise and threaten the viability of the broader Nigerian Electricity Supply Industry (NESI).

The bill stipulates that NERC will not only supervise the recapitalisation exercise but will also impose sanctions on companies that fail to comply. These sanctions may range from equity dilution to government-facilitated re-privatisation. For companies already in receivership, such as the Kaduna and Yola DisCos, the bill empowers NERC to expedite their restructuring or divestment processes.

While the bill aims to reset the sector’s investment climate and restore viability, it has sparked criticism from stakeholders.

The Forum of Commissioners of Power and Energy, which includes energy regulators at the sub-national level, had expressed concern that the proposed legislation threatens the decentralised electricity market introduced under the 2023 Act. The Forum warned that the amendment could reverse the gains made in empowering states to regulate electricity supply within their jurisdictions.

In addition to recapitalisation, the bill mandates the Federal Government, through the Ministry of Power and in consultation with NERC, to develop a comprehensive financing framework for NESI within 12 months.

This framework is expected to align with the National Electricity Policy and Strategic Implementation Plan, and its objectives include de-risking investment across the power value chain, attracting long-term capital in local currency, and addressing the sector’s crippling reliance on unstructured subsidies.

The draft outlines several policy pillars to be included in the financing framework. These include dedicated funding for gas-to-power and distributed energy projects, a transparent and predictable tariff regime that guarantees cost recovery for efficient operators, and the phased elimination of subsidies deemed regressive. It also emphasises a clear determination of federal and state equity contributions in the DisCos, which would clarify governance and financial accountability.

The framework also proposes concessions for certain power plants currently under the Niger Delta Power Holding Company, and the complete recapitalisation of DisCos through NERC’s oversight. The bill specifically mentions that investment flows should be protected from foreign exchange risks by prioritising local currency financing instruments, while also providing tax incentives to encourage private sector participation.

Despite the government’s optimism, some power sector analysts and advocacy groups argue that the proposed measures may be too aggressive to implement in the current macroeconomic climate. They highlight unresolved subsidy debts, liquidity shortfalls, and regulatory uncertainties that continue to scare away investors. These groups have recommended extending the recapitalisation window to 24 months, similar to the timeline adopted during the Central Bank-led banking sector recapitalisation in 2005–2006.

They further argue that unless the federal government addresses accumulated tariff shortfalls, gas supply constraints, and transmission bottlenecks, new investment alone will not fix the structural inefficiencies plaguing the electricity sector.

A section of the draft bill reads, “The Federal Government shall, through the minister and in consultation with the Nigerian Electricity Regulatory Commission, establish a comprehensive framework for financing of projects in the NESI within 12 months from the commencement of this Bill. The framework shall aim to attract and de-risk investments across the power value chain from generation, transmission, distribution, reduce diesel and petrol-based self-generation, and address the crippling financial crisis and debt overhang in the Nigerian power sector.”

It further adds that the commission may issue directives requiring core investors in the DisCos to inject equity into their companies or risk regulatory action, noting that such measures must be implemented without disrupting electricity services or eroding investor confidence.

“The commission shall consult widely and take such measures as are necessary to ensure that the implementation of any order or directive on recapitalisation neither disrupts continuity of service nor undermines investor confidence in the NESI,” the bill states.

It also calls for an explicit determination of the federal government’s equity position in each DisCo and requires both the federal and state governments to meet their financial obligations reflective of their ownership shares.

The amendment’s emphasis on accountability and financial restructuring comes at a time when power supply remains unstable across much of Nigeria, with erratic distribution, high technical and commercial losses, and continued reliance on private generators. Sector experts believe that any realignment of the DisCos must be accompanied by significant improvements in regulatory governance, gas supply coordination, and infrastructure upgrades.

As the Electricity Act (Amendment) Bill, 2025, continues through the legislative process, it is expected to provoke intense debate over the balance between government intervention and market-led reform. While the intent to force recapitalisation and remove non-performing investors may resonate with frustrated electricity consumers, its successful implementation will depend heavily on the government’s ability to honour financial commitments, resolve policy contradictions, and build stakeholder consensus.

Ultimately, the fate of Nigeria’s electricity distribution companies—and the broader health of the power sector—may hinge on how effectively this legislation navigates political realities and translates into practical reform.