As Nigerian electricity Distribution Companies (DisCos) prepare to renew their operational licences in 2028, the federal government has announced plans to introduce a minimum capital adequacy requirement.
Minister of Power, Adebayo Adelabu, who made this known at the Nigeria Energy Forum in Lagos, said the aim is to strengthen the financial health of DisCos and boost liquidity in the Nigeria Electricity market.
Speaking on the theme: “Powering Nigeria through Investment, Innovation, and Partnership,” Adelabu said challenges of under-capitalisation and debt burden have continued to hamper the operations of DisCos, leading to poor service delivery over the years.
“As the tenure of their operational licenses approaches renewal, the government intends to introduce a minimum capital adequacy requirement as part of the license renewal process, to strengthen the financial health and liquidity position of the utilities”, Adelabu stated.
The push for recapitalisation is a response to deep-seated financial issues within the distribution segment of Nigeria’s power sector, which the Minister of Power has openly criticised at different fora.
Pinnacle Daily recalls that the minister had, at different events this year, lamented about the weak financial performance of DisCos, threatening that poorly performing ones would not renew their licences when they expire in 2028. He blamed the Discos for the poor power supply across the country.
Adelabu attributed the root of the problem to the 2013 privatization exercise, stating that many investors who took over the DisCos lacked both the technical and financial capacity to run them effectively.
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Many DisCos are reportedly heavily indebted and undercapitalised. Industry experts have observed that undercapitalisation affects their ability to invest in infrastructure, pay for the electricity they receive from generation companies, and improve service delivery.
In terms of revenue, reports have shown persistent poor performances by the DisCos. The second quarter (Q2) of 2025 report of the Nigerian Electricity Regulatory Commission (NERC) revealed a sharp decline in revenue remittance by DisCos. The report showed that DisCos collectively remitted ₦399.20 billion to the electricity market, reflecting a 27.9 per cent decline from the ₦553.63 billion recorded in the previous quarter.
The low financial remittances have also been attributed to why the Federal Government continues to incur electricity subsidy obligations running into about ₦3 trillion in the last 18 months, as Pinnacle Daily had reported.
Also, in terms of metering, only 6.42 million out of the total 11.82 million active registered customers were metered as of June 2025.
The recapitalisation policy is part of a broader reform agenda by the Federal Government, which also includes the Electricity Act 2023 that devolves regulatory powers to states, efforts to clear a N4 trillion debt to generation companies, and large-scale infrastructure projects like the Presidential Metering Initiative.
Continuing his address at the event in Lagos, the minister said the government is executing some policy reforms aimed at deepening commercialisation of the power sector. Among them is the tariff review, particularly for Band A consumers, done in 2024 to ensure it is cost-reflective for improved electricity supply.
He mentioned that President Bola Tinubu has approved a ₦4 trillion bond to clear verified generation companies (GenCo)’s and gas supply debts.
The minister went on to say that a targeted subsidy system was being designed to safeguard poor households while also ensuring a long-term route toward full commercialization and viable industry.
Speaking on efforts to improve electricity infrastructure, the minister said the Presidential Power Initiative (PPI) is now implementing a planned national programme to accelerate grid development and modernization.
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He stated that Phase Zero of the PPI has already delivered over 700MW of new transmission capacity, and Phase One, which is scheduled to add 7,000MW, is already underway, with contracts signed with Siemens Energy, CMEC, Elswedy Electric, and Power China.
“Under the phase zero of the Presidential Power Initiative (PPI), we enhanced transmission capacity, grid stability, and overall system reliability, with over 700MW of additional transmission capacity already achieved.
“Under the Presidential Power Initiative (PPI) Phase One, contracts have been signed with Siemens Energy, CMEC, Elswedy Electric, and Power China. Financing arrangements are underway to support implementation. Phase one is planned to add 7000MW operational capacity to the grid.”
He also disclosed that the successful integration of the 700MW Zungeru Hydropower Plant into the national grid helped increase average generation capacity to 5,300MW in 2024, from 4,200MW in 2023.
Addressing Metering Gaps
He stated that the Presidential Metering Initiative (PMI) secured ₦700 billion from the Federation Account Allocation Committee (FAAC) to close metering gaps. This money, according to him, would be used to deploy 1.1 million meters by the end of 2025 and 2 million meters a year for the next five years. He further stated that this is in addition to the 3.2 million meters being purchased under the World Bank’s DISREP programme.
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Adelabu disclosed that in order to promote the growth of renewable energy and improve access to electricity in rural and underserved areas, the Federal Government is mobilizing more than $2 billion through important facilities, such as the $750 million World Bank DARES programme, the $500 million NSIA RIPLE platform, and the $190 million JICA fund.
While revealing that there are over 10 gigawatts of stranded generation capacity, the minister said Nigeria’s power sector is now open to strategic partnerships to mobilise the investments required to unlock this potential.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in Mass Communication. He can be reached via @VICTOREZEJA on X
