FG May Divest 11 Discos to New Investors in Electricity Act Amendment Bill

The Federal Government is considering amendments to the Electricity Act that would open the door for the sale of up to eleven electricity distribution companies (Discos) to new investors, part of a broader reform plan aimed at attracting private capital, improving service delivery, and reducing government liabilities. The proposed changes are centered on empowering regulators to facilitate equity transfers, usher in fresh management teams, and restructure the sector toward performance and accountability.

Under current rules, Discos operate under licence agreements and are effectively state-supervised, with ownership restricted and few avenues for full private takeover. The proposed amendment would allow the Federal Government to divest stakes in selected distribution utilities, potentially transferring control and operational responsibility to new investors—domestic or foreign—under frameworks that guarantee regulatory oversight and performance-based management.

According to sources close to policy discussions, the rationale behind the sale lies in longstanding service delivery failures. Distribution companies have struggled to deliver stable power, with persistent issues relating to energy theft, poor metering, technical losses, and weak billing systems. Government officials believe that fresh capital, stronger governance, and improved operational efficiency can reverse those failures and meet rising demand.

It is expected that the amendment will authorize the Nigerian Electricity Regulatory Commission (NERC) to oversee stakeholder approval processes, performance criteria, and license reassignment where necessary. It may also empower the Transmission Company or other transitional entities to facilitate financial restructuring or ownership transfers in contested states or locations.

In addition to private takeover, the Electricity Act amendment may also permit partial public-sector retention or minority government holdings, ensuring that national interest is preserved while enabling operational flexibility. The government reportedly intends to retain some influence over tariff regulation and service standards even if majority equity changes hands.

The move is tentatively scheduled alongside broader amendments, including enabling mergers, licensing consolidations, and sanctions for poorly performing licensees. These changes aim to strengthen the sector’s governance if properly implemented—and align with federal commitment to accelerate power access and enhance reliability.

Industry experts caution that success hinges on transparency, fair valuation, and well-structured investor commitments. Poorly designed divestment could result in concentrated ownership, tariff abuse, or continued inefficiencies. Observers also note that past privatization efforts in other sectors have occasionally led to elite capture or asset stripping due to weak regulatory oversight.

Meanwhile, labour unions within the power sector have expressed concern, warning that outright sales may lead to layoffs, reduced local ownership, or destabilization of existing workforce arrangements. They are calling for clear labour protections, retention clauses, and consultation rights as conditions for any new investor entry.

Private equity firms and strategic investors have reportedly shown preliminary interest in distribution assets, particularly those serving high-consumption urban centres like Lagos, Port Harcourt, and Abuja. They view utility reform as a potential opportunity to unlock consistent revenue streams, especially if paired with improved metering, theft reduction, digital billing infrastructure, and network upgrades.

NERC commissioners have emphasized that investor vetting will be rigorous, with performance bonds, phased investment commitments, and strict compliance requirements forming part of contracts with new operators. They also noted that any investor acquiring a distribution company must invest in modern metering systems and expand coverage to underserved customers within designated timelines.

Critics warn that timeliness and implementation will be key. Legislative amendments without robust follow-through could lead to regulatory uncertainty—and may deter serious investor interest. Observers also stress the importance of coordinated reforms in generation, transmission charges, and regulatory financing if distribution firms are to become financially viable.

The proposed amendment comes amid growing pressure to reduce fiscal losses linked to state participation in the power sector. The government’s need to cover tariff shortfalls and bailout cost overruns has placed increasing demand on public coffers. Selling Discos—not simply re-licensing them—could translate into immediate capital inflows and relieve future subsidy burdens.

President and sector champions are scheduled to engage lawmakers on the amendment ahead of debate in the National Assembly. If passed, the changes could reshape Nigeria’s electricity landscape by injecting private sector discipline and expertise into the distribution value chain, while placing increased responsibility on regulators to ensure oversight.

Supporters of the reform argue that selling underperforming state-influenced Discos to results-driven investors could lead to tangible improvements: fewer blackouts, better metering services, efficient billing, and expanded grid reach. But for this to succeed, reforms must go beyond ownership transfer to include stronger accountability, community inclusion, and sustainable politics of service delivery.

Until the Electricity Act amendment takes concrete legislative and operational form, the plan remains at the conceptual stage. Yet it signals a striking shift in government thinking—from managing distribution directly to enabling strategic investor participation. If properly implemented, the sale of eleven Discos could mark a watershed in Nigeria’s decade-long quest for reliable and affordable electricity.