The federal government is preparing to implement new regulations that will require electricity Distribution Companies to maintain minimum capital adequacy levels as a condition for renewing their operating licenses.
This initiative seeks to bolster the financial stability and liquidity of utility providers across the country.
Power Minister, Chief Adebayo Adelabu, announced the development during yesterday’s opening of the Nigeria Energy Week 2025 at the Landmark Event Centre in Lagos.
The summit, produced by Informa Markets, centers on the theme “Powering Nigeria through Investment, Innovation, and Partnership.”
Adelabu explained that the power sector continues to grapple with insufficient capitalization among various Distribution Companies and significant debt challenges.
“As the tenure of their operational licenses approaches renewal, the government intends to introduce a minimum capital adequacy requirement as part of the license renewal process, to strengthen the financial health and liquidity position of the utilities,” Adelabu said.
The minister further revealed that before the current administration took office, Nigerian citizens were spending approximately N15 trillion annually on diesel and fuel for private generators due to undependable public electricity services. However, he noted that reforms under President Bola Tinubu’s government have transformed this situation, with improved power delivery now evident across the nation.
These figures align with data from the National Bureau of Statistics, which indicated that petrol import expenditures surged by 105.3 percent to N15.42 trillion in 2024, compared to N7.51 trillion in 2023.
The minister called on private sector participants to increase their investments in Nigeria’s electricity sector, emphasizing that the federal government cannot single-handedly finance all necessary improvements to achieve optimal efficiency.
Adelabu also provided progress reports on key infrastructure initiatives. He announced that agreements for Phase One of the Presidential Power Initiative have been executed, targeting an additional 7,000MW of operational capacity for the national grid. He noted that generation capacity averaged around 5,300MW throughout 2024, representing an increase from 4,200MW in 2023.
“In parallel to the grid expansion, generation capacity is being expanded through the rehabilitation of existing NIPP plants to unlock about 345MW, alongside the successful integration of the 700MW Zungeru Hydropower Plant into the grid. Collectively, these interventions have helped sustain an average generation capacity of approximately 5,300MW in 2024 up from 4,200MW recorded in 2023.”
The minister disclosed that the Presidential Metering Initiative is now operational, with N700 billion secured to install 1.1 million meters by the end of 2025.
He highlighted the restructuring of the Transmission Company of Nigeria into two separate entities: the Nigerian Independent System Operator, responsible for grid operations and electricity market coordination, and the Transmission Service Provider (TSP), which handles ownership, maintenance, and expansion of transmission infrastructure. This represents a significant structural transformation that has been long anticipated in the power sector.
Adelabu made a direct appeal for investment, stressing that Nigeria’s power sector is more receptive to business opportunities than ever before. He drew attention to over 10 GW of underutilized generation capacity as a significant opportunity, assuring stakeholders that market conditions are improving, policy frameworks are well-defined, and national leadership remains dedicated.
“As we commence today’s forum, let me once again emphasise to our investors, financiers, and innovators that Nigeria’s power sector remains open and ready for business more than ever before. We recognize that achieving the scale of investment required to transform the sector requires greater private sector participation across the entire value chain, particularly in the transmission segment. A useful reference is South Africa’s ambitious $25 billion transmission grid expansion initiative, which seeks private developers to deliver 14,000 kilometers of new power lines and connect over 59 GW of new capacity within the next 14 years. This is remarkable when compared to Nigeria’s Presidential Power Initiative (the Siemens project) valued at $2.3 billion. In Nigeria today, we have over 10 GW of stranded generation capacity. Energy that could power industries, create jobs, and even support electricity exports to our neighbouring countries through the regional power pool. We are therefore open to strategic partnerships to mobilize the necessary investments and unlock this potential. Our market fundamentals are improving, our policy environment is clear, and the national leadership is committed to creating the enabling conditions for long-term investment and innovation,” Adelabu said.
The minister discussed the extensive reform program for the sector initiated in 2023, characterizing it as a comprehensive strategy to reposition Nigeria’s power sector for sustainability, efficiency, and expansion.
He said: “This approach spans critical pillars which include legislation, policy reforms, infrastructure development, energy transition and access expansion, and local content and capacity development with each designed to address structural challenges, unlock private capital, and enhance service delivery across the electricity value chain.”
Adelabu emphasized the Electricity Act 2023 as a crucial achievement, which has already provided regulatory independence to 15 states. Regarding policy developments, he announced that the Integrated National Electricity Policy, the first comprehensive sector-wide policy in nearly two decades, has received approval.
He said: “This represents a clear shift towards a liberalized and investment-friendly electricity market. Since its passage, 15 states have received regulatory autonomy to establish subnational electricity markets with one fully operationalized. We are working actively with these states to ensure strong alignment between the wholesale market and the retail market. In this regard, we believe the active involvement of state governments, particularly in the off-grid segment is critical, given the series of roundtable engagements held with governors by the Rural Electrification Agency (REA), as well as the ongoing efforts to closely track the Distribution Company (DisCo) performance within their respective jurisdictions.”
Addressing market stabilization and sector commercialization, he stated that the government is advancing power sector commercialization to enhance revenue, liquidity, and investor confidence. “Through tariff policy reforms which enabled cost-reflective tariffs for select consumers, supply reliability has improved while reducing energy costs for industries, and industry revenue has increased by 70 percent to N1.7 trillion in 2024 compared to previous year and the revenue is expected to exceed N2 trillion for 2025.”
Regarding market stabilization measures, he disclosed: “Mr. President has approved a N4 trillion bond to clear verified GenCo and gas supply debts. Alongside this, a targeted subsidy framework is being developed to protect vulnerable households and ensure a sustainable path toward full commercialisation and viable industry,” the minister added.
