Why Revoking DISCO Licenses Is Essential for Nigeria’s Power Sector Reform: An Expert Analysis

In a recent interview on Arise Television, energy expert Nick Agule made a bold call to Nigeria’s new Minister of Power, Joseph Tegbe: revoke the licenses of the country’s electricity distribution companies (DISCOs) and reassign them to competent operators. This recommendation, while drastic, reflects a growing consensus among industry stakeholders that the current privatization model has failed to deliver reliable electricity to Nigeria’s 200 million citizens. Below, we unpack Agule’s arguments, provide deeper context on the systemic challenges, and explore practical pathways for reform.

The Scale of Nigeria’s Power Deficit

Agule highlighted a staggering gap: Nigeria requires approximately 200,000 megawatts (MW) of electricity to meet its economic and population needs, yet the country currently generates only about 5,000 MW. To put this in perspective, South Africa—with a population roughly one-third of Nigeria’s—generates over 45,000 MW. This deficit means that millions of Nigerians rely on expensive, polluting diesel and petrol generators for daily life and business operations. The economic cost is immense: the World Bank estimates that power outages cost Nigeria an estimated $29 billion annually in lost GDP.

[[PEAI_MEDIA_X]] The new minister’s reported focus on metering, gas supply, and transmission issues is a step in the right direction, but Agule argues these are operational matters, not policy-level interventions. The minister’s primary role, he insists, is to create an enabling environment for private sector operators to thrive—not to micromanage day-to-day utility operations.

The 2013 Privatization: A Flawed Blueprint

Agule’s central thesis is that the 2013 privatization of Nigeria’s power sector was incomplete and poorly executed. While the generation companies (GENCOs) and distribution companies (DISCOs) were sold to private investors, the transmission segment remained under state control via the Transmission Company of Nigeria (TCN). This has created a critical bottleneck: even when GENCOs produce power, the transmission grid cannot efficiently deliver it to DISCOs, leading to frequent grid collapses and load shedding.

For example, in 2022, Nigeria experienced over 20 grid collapses, each plunging large parts of the country into darkness. The TCN is chronically underfunded and lacks the technical capacity to upgrade aging infrastructure. Agule’s call to revisit the privatization exercise and consider privatizing transmission is not new—similar recommendations have been made by the Nigerian Electricity Regulatory Commission (NERC) and international bodies like the IMF. However, political resistance and concerns about national security have stalled progress.

Why DISCO Licenses Should Be Revoked

Agule’s primary recommendation—revoking DISCO licenses—is based on the premise that many current operators lack the financial and technical competence to manage distribution networks effectively. Since privatization, DISCOs have been criticized for:

• Poor metering: Over 50% of electricity consumers remain unmetered, leading to estimated billing disputes and revenue losses.
• Inadequate infrastructure investment: Many DISCOs have failed to upgrade transformers, lines, and substations, resulting in frequent outages and voltage fluctuations.
• Low collection efficiency: Some DISCOs collect less than 60% of billed revenue due to theft, corruption, and poor enforcement.

[[PEAI_MEDIA_X]] A practical example: In 2023, the Benin Electricity Distribution Company (BEDC) was fined by NERC for failing to meet performance targets, including meter deployment and customer service standards. Yet, no license has been revoked to date. Agule argues that reassigning licenses to operators with proven track records—such as those managing successful utilities in Ghana or Kenya—could inject much-needed expertise and capital.

The Minister’s Role: Policy, Not Operations

Agule’s critique of the minister’s reported focus on operational issues is a crucial distinction. In a well-functioning power sector, the minister sets policy (e.g., tariff frameworks, renewable energy targets, and privatization guidelines) while independent regulators and private operators handle execution. By diving into metering and gas supply, the minister risks duplicating efforts and creating confusion.

For instance, the minister could instead prioritize:

• Enforcing performance contracts: Require DISCOs to meet clear, time-bound targets for meter installation, loss reduction, and customer satisfaction—or face license revocation.
• Unlocking gas supply: Work with the Ministry of Petroleum to ensure that gas producers prioritize domestic supply for power generation, addressing the frequent gas shortages that force GENCOs to shut down.
• Attracting private capital for transmission: Explore public-private partnerships (PPPs) to upgrade the grid, similar to the successful model used in India’s Power Grid Corporation.

Practical Examples from Other Markets

Nigeria is not alone in facing power sector challenges. Countries like India, Brazil, and South Africa have implemented reforms that offer lessons:

• India: The country privatized distribution in several states (e.g., Delhi, Odisha) and saw significant improvements in metering, billing, and loss reduction. The key was strong regulatory oversight and performance-based incentives.
• Brazil: The government used a combination of privatization and PPPs to expand transmission infrastructure, reducing grid losses from 20% to under 10% in a decade.
• South Africa: Despite its own challenges, Eskom’s unbundling into separate generation, transmission, and distribution entities has improved accountability and attracted private investment.

[[PEAI_MEDIA_X]] For Nigeria, the path forward requires political will to enforce existing laws, revoke underperforming licenses, and complete the privatization of transmission. Without these steps, Agule warns, the country will remain trapped in a cycle of low generation, poor distribution, and chronic underinvestment.

Conclusion: A Call for Bold Action

Nick Agule’s interview serves as a wake-up call for Nigeria’s power sector. The new minister has a unique opportunity to break from the past and implement structural reforms that address the root causes of the crisis. Revoking DISCO licenses and reassigning them to competent operators is not a silver bullet, but it is a necessary first step. Combined with transmission privatization, stronger regulatory enforcement, and targeted policy interventions, Nigeria can finally close the 195,000 MW gap and deliver reliable, affordable electricity to its people.

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