A new report released by an Abuja-based policy think-tank, Agora Policy, has called for structural reset of the nation’s power sector, beyond tariff adjustments.
The report noted that despite the privatisation, the sector continues to face unresolved challenges, adding by the end of 2025, the nation’s electricity system still reflected the central weakness of the post-privatisation market: significant installed capacity but limited dependable supply.
The report revealed that across 28 grid-connected plants, installed capacity stood at 13,625MW, yet actual output remained far below this level with average electricity generated across the four quarters of about 4,474MW/h slightly above 2024’s level of 4,223MWh/h.
It noted that the quarterly report of the Nigerian Electricity Regulatory Commission (NERC) showed that the average plant availability factor remained around 39–40% throughout 2025, meaning that, at any point in time, more than 60% of installed grid-connected capacity was unavailable for dispatch.
In changing this abysmal performance, the report said it would require the government to treat the sector as distressed infrastructure requiring recapitalisation, ownership restructuring, contract enforcement, and industrial-demand recovery, rather than as a tariff problem to be solved by gradually passing higher costs to consumers.
It said the first priority should be a decisive restructuring of the Distribution Companies (DisCos) because distribution remains the commercial heart of the value chain. Arguing that Nigeria should move beyond the fiction that all eleven DisCos can be repaired through tariff adjustments alone.
The report recommended that the Federal Government through the Ministry of Power and NERC should conduct a detailed technical and commercial assessment of electricity distribution with the objective of classifying DisCos into three groups: viable utilities that can be recapitalised to fund capex requirements of the distribution zone; weak utilities that require management intervention, sub-franchising, or partial restructuring; and failed utilities that should be placed into regulatory administration, broken into smaller service territories, or re-concessioned to new operators with technical abilities.
The report also noted that the Nigerian Bulk Electricity Trading Plc (NBET) was created as a transitional credit bridge because DisCos were not creditworthy enough to support bankable PPAs directly, but affirmed that its continued centrality has allowed market failure to accumulate as claims against the federal balance sheet.
It therefore, recommended that the government should stop NBET from entering new PPAs, audit and classify all NBET-related receivables, securitise only verified obligations, cap or renegotiate disputed claims, and gradually novate existing contracts to creditworthy DisCos, eligible industrial customers, licensed traders, embedded generators, and state electricity markets.
“NBET should remain only as a residual stabilisation vehicle for legacy obligations and non-creditworthy segments, with a clear sunset path and a declining contract book. This transition must be disciplined because direct contracting with weak counterparties would simply move the NBET problem elsewhere. No DisCo or state market entity should inherit NBET contracts unless it provides credible payment security through escrow accounts, letters of credit, revenue locks, guarantees, or other enforceable mechanisms.
“The transition away from NBET should also be used to create a direct contracting market in which GenCos, embedded generators, state-backed suppliers, and licensed traders can sell power to industrial customers, while DisCos and transmission operators earn transparent wheeling charges for the use of their networks,” the report said.
It recommended a credible gas-to-power industrialisation strategy, saying that no country can build a competitive manufacturing economy if electricity generation remains dependent on gas supplied through high-risk private contracts that are inherently expensive. Adding that delivering low-cost gas for power should be treated as part of Nigeria’s industrial policy rather than merely as a private commodity sale.
“The federal government should create a Gas-to-Power Infrastructure and Industrialisation Fund to finance the delivery of pipelines, processing plants, compression stations, storage, metering, and last-mile gas connections to power plants and industrial corridors. The objective should be to reduce the delivered cost of gas by lowering infrastructure financing costs and payment-risk premiums as against the current approach of setting tariffs for gas producers,” the report said.
Others recommended by the report include roll-out of a fully funded national metering and customer enumeration plan, and diversification of supply through mini-grids, distributed solar, storage, and regional grids.
