Electricity distribution companies in Nigeria (DisCos) are grappling with an estimated capital deficit of N2 trillion (about $2.5 billion) and require fresh investments to revive the industry struggling to adequately supply power to over 200 million citizens.
Special Adviser on Energy to President Bola Tinubu, disclosed this in an interview with Bloomberg.
She stated: “We need to set policies that facilitate reorganization and recapitalization and bring in new partners with new capital.
The recapitalization will accompany plans to make electricity tariffs cost-reflective, which will improve the liquidity and viability of the power sector.”
The presidential adviser however did not provide a date or more details for the recapitalization plan.
Recall that President Tinubu had pledged on January 1 to improve electricity supply in the country.
While the country privatized generation and distribution in 2013, tariffs are set by the Nigeria Electricity Regulatory Commission (NERC), which is a government agency.
Power firms are not allowed to charge enough to recover the cost of distributing electricity, with the government paying the difference as a subsidy to companies in the sector.
Without a tariff review, weakness in the naira – which slumped 50% against the dollar last year – and accelerating inflation could push energy subsidies to N1.6 trillion this year from N600 billion in 2023, according to NERC.
“With the current tight fiscal space, government’s ability to cover this shortfall is challenged. These issues have exacerbated the financial-liquidity challenges in the sector,” Verheijen said.
Only 4,000 megawatts of Nigeria’s 13,000 megawatts of installed capacity for electricity generation are distributed to homes and businesses.