In a bold move to address the persistent power shortages plaguing the country, Nigeria’s government is contemplating the transfer of its ownership in 11 power distribution companies (DISCOs) to state governments.
This is according to information contained in a tweet from Minister of Power Adebayo Adelabu on Friday.
Currently, the federal government holds a 40% stake in these DISCOs, privatized about a decade ago. Each of these companies operates across three or more states, playing a crucial role in the country’s power distribution infrastructure.
In a strategy aimed at handing over oversight and efficiency in power distribution to States, Minister Adelabu disclosed that the federal government is considering an equity swap.
This would involve trading its shares in the DISCOs for shares in the Niger Delta Power Holding Co, another power entity co-owned by the federal, state, and local governments, but privately managed.
- To enhance state involvement, we’re exploring the idea of unbundling regional Discos into different states for more localized oversight. We’re also looking into financial collaboration between federal and state governments, potentially involving a swap of stakes in DISCOs with state stakes in the Niger Delta Power Holding Company. Adelabu
His comments also suggest in exchange for handing over FG’s 40% Stake to States, the latter will swap their share of NDPHC to FG.
Niger Delta Power Holding Company Limited (NDPHC) is a limited liability company that serves as the legal vehicle to hold the NIPP assets using private sector-orientated best business practices.
Adelabu emphasized the government’s commitment to this sector. “We are committed to collaborating closely with the state ministries of power to tackle challenges in the distribution segment, considering its retail nature,” he stated in the tweet.
Nigeria, Africa’s most populous nation with over 200 million people, faces a significant gap between its installed power generation capacity of 12,500 megawatts and the actual power distributed, estimated at around 4,000 megawatts.
This disparity has left millions of households and businesses dependent on generators for electricity.
To revitalize the power sector, President Bola Tinubu, signed into law the Electricity Act which gave States more power to regulate the sector. This new legislation also allows state governments to generate and distribute power, a stark shift from the previous law that vested exclusive rights in the hands of the federal government.
This proposed shift in power utility ownership is seen as a critical step towards decentralizing Nigeria’s power sector, and potentially paving the way for more localized and efficient management of power resources and distribution networks.
It is also likely to create concerns among investors in the sector who worry about the capacity of the states to effectively regulate the sector
See the tweet below