The Federal Government has issued a stern warning to electricity distribution companies (DisCos) across the country, vowing to enforce stricter financial and operational standards to address widespread insolvency and inefficiency within the sector.
Speaking at the Nigeria Energy Leadership Summit in Lagos, the Minister of Power, Adebayo Adelabu, said the government would introduce a minimum capital adequacy requirement for DisCos seeking licence renewal, as many have been found to be heavily indebted and undercapitalised.
Tougher Licence Rules for Indebted DisCos in Nigeria
Adelabu disclosed that the decision follows a critical review of the industry’s financial health, which showed that several DisCos are struggling to meet their obligations.
He noted that these liquidity challenges have weakened the sector’s ability to deliver stable and reliable electricity supply.
He said, “As the tenure of operational licences approaches renewal, we will introduce a new capital adequacy requirement to strengthen the financial health and liquidity positions of these utilities. Any DisCo unable to meet this benchmark risks losing its licence.”
According to him, some of the major federal power programmes, such as the Presidential Power Initiative—popularly called the Siemens Project—and the Presidential Metering Initiative, are financed through external loans that have become significant liabilities for the distribution firms.
“The Siemens Project, for instance, is funded through loans obtained by the Federal Government from the German and Chinese governments.
The distribution segment of this initiative represents a debt burden on the DisCos, and they are obligated to repay it,” the minister explained.
Mounting Debt Threatens Sector Viability
Adelabu lamented that most DisCos are yet to demonstrate the financial discipline required to sustain the sector.
He pointed out that the combined exposure of the firms under the $700 billion Metering Initiative and the World Bank’s $500 million Distribution Sector Recovery Programme is unsustainable without increased capitalisation.
“Are these debt burdens not too heavy for the DisCos? Without improved capitalisation, they will remain overleveraged and unable to invest in infrastructure,” Adelabu warned.
He stressed that the government would no longer tolerate weak operators who fail to meet performance benchmarks, saying that recapitalisation is a non-negotiable requirement for continued operation.
“There are serious investors waiting to take over underperforming networks.
If you want to stay in the market, you must inject funds, expand your network, and deliver quality service,” he added.
Privatisation Under Fire
The power minister also blamed the 2013 privatisation exercise for the current challenges facing the sector.
He argued that many of the companies that acquired DisCos lacked the technical and financial capacity to run them efficiently.
“One of the fundamental flaws of the 2013 privatisation was the entry of investors without adequate capital or expertise in utilities management,” he said.
“Some of them do not even have the funds required to invest in infrastructure expansion.”
Adelabu noted that the Band A tariff system, which targets customers with better power supply, could not be expanded beyond 15 percent of consumers because of the DisCos’ poor financial standing and weak infrastructure.
FG’s Plan to Restore Investor Confidence
To address the sector’s persistent liquidity crisis, the Federal Government has launched targeted national programmes aimed at expanding and modernising the national grid.
Adelabu said these reforms are designed to build resilience, attract new investment, and improve consumer confidence.
He stated, “We are implementing infrastructure programmes to accelerate expansion and modernisation of the national grid. This time, it is not business as usual.”
He added that the government is also improving coordination between the Nigerian Electricity Regulatory Commission (NERC) and state-level regulators to ensure accountability and performance monitoring across all utilities.
DisCos Respond to FG’s Warning
While the Federal Government insists that the new policy will improve service delivery, representatives of the DisCos maintain that they are collaborating with authorities to stabilise the system.
The Executive Director of Research and Advocacy for the Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, said the DisCos remain committed to supporting the government’s reforms.
He stated, “We are working with the Federal and state governments to ensure improved electricity distribution.
The more power we distribute, the more revenue we generate for the sector and the economy.”
Oduntan added that while the DisCos are not perfect, their operations have significantly improved in the past decade since privatisation.
“We believe in the policies of President Bola Tinubu’s administration and will continue to align with its vision for a sustainable power sector,” he said.
Experts Back FG’s Decision
Energy experts have welcomed the government’s move to introduce capital adequacy requirements for licence renewal, describing it as a critical step toward restoring credibility and financial sustainability in the sector.
They argue that the new policy could encourage mergers, acquisitions, or new investors with stronger financial capacity, reducing the dominance of weak operators.
With the government’s firm stance, the coming months are expected to shape the future of Nigeria’s electricity market — determining whether the nation can finally overcome the decade-long power crisis and achieve a reliable, investment-driven energy sector.
