Following the recent receivership of Ikeja Electric Distribution Company (IKEDC) and the mounting financial crisis affecting Nigeria’s power sector, Ade Adesokan, a public affairs commentator and international human rights advocate, has urged the federal government to establish a comprehensive Power Sector Recovery Fund to prevent the collapse of additional distribution companies and restore stability to the nation’s liquidity strapped electricity market.
The call came as six out of eleven distribution companies privatized in 2013 now face financial distress, with Ikeja Electric joining Abuja, Benin, Kaduna, Kano and Ibadan DisCos under various forms of receivership or financial intervention. The Federal High Court in Lagos has affirmed the appointment of Kunle Ogunba, SAN, as Receiver/Manager over IKEDC, KEPCO Energy Resources Nigeria Limited, and its 70 percent controlling stake in Egbin Power Plc, though the companies have disputed being under receivership.
The National Coordinator of the Coalition for Affordable and Regular Electricity (CARE), Mr Chinedu Bosah has described as “abysmal” last year’s performance of Electricity Distribution Companies in Nigeria. This assessment underscores the severity of the challenges facing the sector, with Nigerian Electricity Distribution Companies (DisCos) recording the sum of N431.16 billion as revenues from customers in Q2 2024, reflecting a collection efficiency of 79.31%.
“The systematic failure of distribution companies signals a fundamental breakdown in our power sector architecture,” said Ade Adesokan, the public affairs commentator and international human rights advocate. “Rather than allowing more utilities to collapse under unsustainable debt burdens, the government must act decisively to establish a Power Sector Recovery Fund that provides bridge financing for viable operators while facilitating orderly restructuring for distressed entities.”
Adesokan emphasised that the crisis represents not just an economic challenge but a human rights issue, as millions of Nigerians are denied access to reliable electricity services essential for dignified living, healthcare delivery, education, and economic empowerment.
The proposed recovery fund would be capitalized through government allocations, development finance institution loans, and private sector contributions, providing immediate liquidity relief while supporting long-term structural reforms. This intervention becomes critical as generation companies have appealed to President Bola Tinubu over a staggering N4 trillion government debt accumulated since 2015, threatening potential generation shutdowns that could plunge the nation into deeper electricity crisis.
Power market expert Lanre Elatuyi has highlighted the financial constraints facing DisCos, noting that it’s their primary responsibility to provide meters for all customers but they currently lack the money or access to financing required to meter every customer. This perspective reinforces the urgent need for structured financial intervention to address the sector’s liquidity challenges.
The concept of a recovery fund is not entirely new to Nigeria’s power sector. The World Bank had previously approved a $750 million Power Sector Recovery Operation (PSRO) loan in 2020 to achieve financial sustainability, enhance accountability, and ensure the supply of 4,500 MW/h of electricity to the grid by 2022. Building on this precedent, industry experts believe that a domestic recovery fund could provide more targeted and sustainable financing solutions.
Beyond financial intervention, experts have outlined several strategic pathways essential for sector recovery and transformation. The implementation of smart grid technologies, advanced metering infrastructure, and digital payment systems represents a critical pathway for improving operational efficiency and revenue collection. The deployment of smart meters across all distribution companies could eliminate contentious estimated billing practices while reducing technical and commercial losses that plague the sector.
The Electricity Act 2023, which replaced the previous 2005 legislation, provides a foundation for decentralized power sector governance. However, effective implementation requires enhanced regulatory oversight through the Nigerian Electricity Regulatory Commission, with clear performance metrics, enforcement powers, and specialized dispute resolution mechanisms. Creating investment-grade utilities requires establishing power infrastructure bonds, green energy funds, and robust public-private partnership structures. The sector needs transparent governance frameworks and predictable regulatory environments that protect investor interests while ensuring consumer welfare and fair pricing mechanisms.
The integration of distributed energy resources, including solar mini-grids and battery storage systems, can enhance energy access while reducing pressure on the national grid. Digital transformation through data analytics and customer relationship management platforms will significantly improve service delivery and customer satisfaction. Leveraging the West African Power Pool for cross-border electricity trade and regional energy projects could attract larger-scale investments while improving overall sector efficiency and supply security through grid interconnection opportunities.
Restoring public trust requires transparent communication about reforms, consistent service improvements, and strengthened consumer protection frameworks. This includes establishing consumer ombudsman offices, implementing service level agreements, and developing lifeline tariffs for low-income households to ensure equitable access to electricity services. The controversy surrounding the Ikeja Electric receivership highlights the need for clearer legal frameworks governing debt recovery and asset management. Establishing specialized power sector courts could provide greater certainty for all stakeholders while resolving disputes more efficiently.
“The current crisis, while challenging, presents an unprecedented opportunity to build a more resilient, efficient, and sustainable electricity industry,” Adesokan noted. “Success will depend on coordinated action across financial stabilization, regulatory reform, technology integration, and stakeholder engagement. However, we must remember that access to electricity is fundamentally a human rights issue that affects every aspect of Nigerian life – from healthcare facilities that need power for life-saving equipment to students who require lighting for education.”
Industry analysts are increasingly vocal about the need for comprehensive reforms. Recent policy recommendations suggest that the government must boost power generation through accelerated investment in renewable energy and grid modernisation, targeting at least 10,000 MW by 2027. Given financial pressures on both power generation companies and distribution companies, upward tariff revisions across customer bands, possibly in the form of partial or full removal of electricity subsidies, are likely in 2025.
The power sector’s installed capacity of approximately 12,522 MW remains significantly underutilized due to operational constraints, infrastructure deficits, and the cascading effects of financial distress throughout the value chain. The comprehensive reform strategy aims to unlock this potential while expanding access and improving service quality for millions of Nigerian electricity consumers.
Adesokan emphasized that without swift and decisive action to resolve legacy liabilities, restructure failing entities, and enforce regulatory discipline, Nigeria’s power sector transformation efforts may continue to falter, undermining the nation’s economic development aspirations and industrial productivity growth. “The government has a moral obligation to ensure that basic services like electricity reach every Nigerian citizen,” he concluded.
Ade Adesokan is a public affairs commentator and international human rights advocate
