FG to restructure two failing DisCos in new Power Sector Reform pilot

The Minister of Power, Chief Adebayo Adelabu, has announced that the Federal Government is set to restructure two underperforming electricity distribution companies (DisCos) as part of a pilot reform programme aimed at tackling the persistent challenges within Nigeria’s power sector.

Chief Adelabu made this known on Monday during a meeting with officials of the Japanese International Cooperation Agency (JICA) in Abuja. He explained that the decision follows a comprehensive review of the issues affecting the DisCos, including poor governance, outdated infrastructure, and weak commercial operations.

In a statement issued by his media aide, Bolaji Tunji, the minister noted that the pilot phase would target one DisCo in the North and another in the South. Currently, there are six DisCos in the southern region, Eko, Ikeja, Ibadan, Benin, Port Harcourt, and Enugu, and five in the North, Abuja, Jos, Kaduna, Kano, and Yola. The Federal Government presently holds a 40 per cent minority stake in these companies, which were partially privatised in 2013.

Although Chief Adelabu did not reveal the names of the two affected DisCos or how the restructuring would be implemented, given the private ownership structure, Tunji stated that the pilot programme is slated to run from May to August 2024. The initiative aims to develop a model for operational turnaround through a combination of internal reforms, external technical assistance, and government oversight to enhance power supply services.

JICA’s proposal for the programme advocates for restructuring DisCos “from within” by engaging external experts, strengthening leadership, and providing government support to achieve rapid, tangible improvements in the pilot regions, serving as a basis for broader sectoral reforms.

Chief Adelabu reiterated the government’s commitment to addressing the inefficiencies of DisCos that have consistently underperformed. “This pilot is not optional, we will exercise regulatory authority to restructure underperforming DisCos and enforce compliance if necessary,” he asserted.

He acknowledged the challenges encountered in previous reform efforts, including vandalism, poor governance, and local cultural issues that disrupt operations. The minister identified a key problem as the DisCos’ inability to invest adequately in infrastructure, not merely due to unwillingness but because of low returns on investment, rendering the sector unattractive to prospective investors.

Chief Adelabu instructed the Nigerian Electricity Regulatory Commission (NERC) to proactively implement franchising opportunities and ensure the cooperation of the DisCos, warning that resistance, which had hindered past initiatives, would no longer be tolerated. “This time, we will be intentional and decisive,” he affirmed.

He also underscored the importance of educating the public on the distinct functions of the various entities within the power sector, generation, transmission, and distribution companies, to foster trust and garner public support for the reforms.

During the meeting, JICA presented a strategic roadmap titled ‘Revamping of the Distribution Sector in Nigeria’, developed following the minister’s recent visit to Japan’s energy market. The proposal advocates for a comprehensive, government-supported partnership with clearly measurable outcomes.

Takeshi Kikukawa, JICA’s Power Sector Policy Advisor to Nigeria, remarked during the presentation that the objective is to secure immediate improvements within the pilot areas while establishing a solid foundation for nationwide power distribution reforms.

Tunji added that the Ministry of Power and NERC would finalise the details of the pilot programme in the coming months, prioritising DisCos experiencing severe operational difficulties. He noted that the initiative signifies one of the most robust efforts to resolve Nigeria’s power distribution challenges and rejuvenate investor confidence in the sector.