Nigeria's Power Sector Reform: FG Plans to Restructure Underperforming DisCos to Improve Electricity

• Nigeria's power sector has been experiencing a funding crisis, which the government is still trying to resolve
• The federal government is planning to restructure the underperforming Discos in the sector to improve electricity distribution
• The Minister for Power explained the reasons for the restructuring and what the government hopes to achieve from the exercise

Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.

Minister of Power, Chief Adebayo Adelabu, has disclosed that the federal government will be carrying out a strategic restructuring of the power sector to improve performance.

Adelabu stated this during a two-day retreat organised by the Senate Committee on Power over the weekend.

He stated that the government need to do the restructuring, as a way to trigger the much-needed capital injection into the power sector.

He said;

“To salvage the sector, we will soon embark on restructuring underperforming DisCos and tightening enforcement of performance benchmarks.”

Adelabu explained that the fresh would be used to fund transmission upgrades needed to improve household power supply.

Government's Plan to Restructure Underperforming DisCos

Adelabu narrated that the 2003 restructuring did not yield the needed results as the Discos went to get loans instead of getting technical partners.

The result was that the discos ended up with loans to service instead of partners that would have injected the funds to address the infrastructure problems in the sector.

He also revealed that several discos have been underperforming in power distribution, despite the tariff adjustments for Band A customers, which improved revenue by up to 70%.

Adelabu said;

“We need to get tough with the DisCos, as they can easily frustrate all the gains we have made. They have disappointed us in performance expectations. Whatever we do in generation does not mean anything to consumers if it is frustrated at the distribution points.”

This underscores the need to restructure the sector to improve performance and investment in the crumbling infrastructure, the NATION reports.

FG debts to Gencos and Discos cross N4 trillion

The power minister noted that a tariff hike is necessary, as it is no longer sustainable to continue the current tariff regime with the government paying up to N200 billion in subsidies monthly.

He explained that the government’s indebtedness to the Gencos had crossed N4 trillion, with 2024 alone accounting for N1.94 trillion in electricity subsidies.

The wide metering gap in Nigeria has also impacted revenue generation due to growing consumer distrust, and all the efforts of the government to fix the problem through the N700 billion Presidential Metering Initiative (PMI) has not yielded the needed results.

Lawmakers to probe Discos over N200 billion loans

In related news, Legit.ng reported that the House of Representatives is set to probe the 11 electricity distribution companies over the N200 billion loan from the Central Bank of Nigeria (CBN).

After the National Mass Metering Programme (NNMP) was introduced in 2020, a financing structure was put in place for the CBN to give N200 billion to the 11 discos at single-digit interest rates.

The lawmakers recently discovered shady areas in the loans repaid by the Discos, raising concerns over what happened to the interest.

Source: Legit.ng