Minister: Negative balance sheets makes Discos unbankable

The negative state of the balance sheets of all electricity distribution companies (DisCos) in the country Nigeria constitute the bane of their inability to attract credit facilities from bank for investment in their operations.
This was the submission of the Minister of Power, Chief Bayo Adelabu, while speaking at the PwC Power Roundtable in Lagos. The event had as its theme: “Nigeria’s Multi-Tier Electricity Market: Imperatives for Successful Evolution.”
The minister also disclosed that a minimum capital requirement for DisCos would also form a key criterion for the renewal of their operating licences which are set to expire in 2028. This he however noted will come into effect once it is legislated on. This is aside such conditions as the utilities presenting their detailed performance improvement plans specifying infrastructure upgrades, cost estimates and funding sources as part of the licence renewal process.
Adelabu regretted that the Discos have remained vulnerable and not bankable, due to negative balance sheets, a situation he noted has made them unable to attract loans for critical infrastructure investment, and also unable to provide the capital required to significantly reduce their Aggregate Technical, Commercial, and Collection (ATC&C) losses.
Highlighting the dire financial and operational state of DisCos, the minister therefore stressed the urgent need for investment and structural reforms. He noted that since their acquisition in 2013, most DisCos have failed to invest in reducing ATC & C losses, which currently average around 40 percent.
Adelabu explained that the funds used to acquire these companies were borrowed, leaving them with little capacity to finance further investment needed to improve efficiency.
“Power infrastructure requires significant investment. Even countries with reliable systems like the US, Europe, South Korea, China and Singapore continue to invest billions of dollars in their power sectors. Nigeria cannot afford to do otherwise,” he emphasised.
The Minister stressed that addressing these challenges is critical not just for the power sector, but for national development as a whole, citing impacts on education, health, transportation, and aviation.
He praised the decisive approach of the President Bola Tinubu-led administration, acknowledging that initial difficulties are inevitable but expressing confidence that the reforms will yield long-term benefits.
“Reforming Nigeria’s power sector will require courage and boldness. No one can have an omelette without breaking eggs. By addressing these challenges now, Nigeria will reap lasting improvements in service delivery and national growth,” Adelabu said.
Recall that thee Nigerian Electricity Regulatory Commission (NERC) had initially issued 10-year operational licences to the DisCos which was originally set to expire in 2023, but later extended by five years, pushing their validity period to 2028.