The Federal Government has warned that electricity distribution companies (DisCos) struggling with debts and weak financial capacity risk losing their operating licences.
Minister of Power, Adebayo Adelabu, issued the warning during the Nigeria Energy Leadership Summit in Lagos, stressing that many DisCos are heavily indebted and undercapitalised, posing a major threat to the stability of the power sector.
Adelabu said the government would soon introduce strict financial and operational standards, including a new capital adequacy requirement, for the renewal of DisCos’ licences.
“When their licence tenures are due for renewal, there will be stringent conditions attached,” he said. “Operators must demonstrate the financial strength to invest, expand, and deliver reliable electricity to Nigerians. Those who can’t will have their licences revoked and replaced by stronger investors.”
He explained that several ongoing power projects, such as the Presidential Power Initiative (Siemens Project) and the World Bank-backed Distribution Sector Recovery Programme, are funded through loans that eventually become liabilities for the DisCos.
Adelabu noted that the government’s Presidential Metering Initiative, valued at about $700 billion and jointly funded by federal and state governments, also adds to the debt burden of the distribution firms.
He questioned whether many of the DisCos have the capacity to handle their growing financial obligations, saying the government will no longer tolerate underperforming operators.
According to him, the Ministry of Power is collaborating with national and state electricity regulators to enforce compliance and ensure accountability across the distribution network.
Adelabu also faulted the 2013 privatisation of the power sector, saying several investors who took over the distribution companies lacked both the technical and financial capacity to manage them effectively.
He said this weakness is one of the reasons many customers are yet to be migrated to the Band A tariff class, which guarantees longer hours of electricity supply.
“We restricted Band A to only about 15 per cent of consumers because the DisCos do not have the infrastructure and investment to sustain it,” the minister said.
Responding to concerns about performance, the Executive Director of the Association of Nigerian Electricity Distributors, Sunday Oduntan, maintained that DisCos have made significant progress since privatisation but still face major financial challenges.
He said the companies are working with the government to improve electricity supply while pushing for policies that reflect economic realities.
“We support every policy that improves the power sector,” Oduntan said. “We won’t deceive Nigerians; though we’re not yet where we should be, we’ve recorded noticeable progress in the last decade.”
Adelabu, however, insisted that the future of the electricity industry depends on financial discipline and sustained investment. He vowed that the government will no longer allow weak links to drag down the sector.
Nigeria currently has 12 licensed distribution companies — including Aba Power — serving various regions across the country. But more than a decade after privatisation, power supply remains unstable, with many of the DisCos struggling to meet customer expectations.
