Transgrid Enerco Limited, a consortium comprising North South Power Company Limited (NSP), Axxela Limited, and the Stanbic IBTC Infrastructure Growth Fund (SIIF), has entered into a Share Purchase Agreement (SPA) to acquire a 60% equity stake in Eko Electricity Distribution Company (Eko DisCo). As Nigeria’s second-largest electricity distribution company, Eko DisCo represents a significant investment opportunity. The SPA, signed on January 21, 2025, anticipates the transaction’s conclusion by April 2025.
This acquisition reflects a broader trend of power-generating companies investing in distribution operations to improve efficiency and financial performance. Notable examples include Transcorp’s acquisition of a 60% stake in Abuja DisCo in 2023 and Sahara Power’s 60% ownership of Ikeja Electric. According to Charles Momoh, Chairman of West Power and Gas Ltd (WPG), “Transgrid Enerco will, upon obtaining the relevant regulatory approvals, capitalize on the positive changes occurring within the fast-evolving Nigerian electricity market to reposition Eko DisCo to access new sources of capital.”
Privatization and Its Impact on Nigeria’s Power Sector
The privatization of Nigeria’s electricity industry began with the Electric Power Sector Reform Act (EPSRA) of 2005. This legislation led to the unbundling of the Power Holding Company of Nigeria (PHCN) into six generation companies (GENCOs), 11 distribution companies (DISCOs), and a transmission company. By 2013, 60% equity in the DISCOs was privatized, with private investors taking operational control while the government retained a 40% stake. Despite privatization, regulatory controls, such as non-cost-reflective tariffs, have constrained DISCOs financially, limiting their ability to operate efficiently.
As inefficiencies and mounting debts persisted, the government introduced stabilization measures, including intervention funds from the Central Bank of Nigeria and policy adjustments granting states more autonomy to generate and transmit power independently. These reforms have created opportunities for private entities and financial consortia to acquire stakes in underperforming DISCOs, aiming to revitalize operations and improve service delivery.
Challenges in Attracting Investment to Nigeria’s Power Sector
Despite these reforms, Nigeria’s power sector continues to face investment barriers. One significant challenge is regulatory inconsistency, such as delays in tariff adjustments and weak enforcement of contracts. This instability undermines investor confidence, deterring long-term commitments.
Additionally, the sector suffers from outdated infrastructure and underinvestment, leading to frequent power outages and high transmission losses. These inefficiencies increase operational costs, making the sector less attractive to private investors. Furthermore, the absence of cost-reflective tariffs prevents DISCOs from covering their expenses, resulting in revenue gaps and financial distress.
These combined challenges—regulatory uncertainty, infrastructure deficits, and non-cost-reflective tariffs—create a tough environment for investment, emphasizing the need for continued policy reform and infrastructure development to unlock the sector’s potential.
About Eko DisCo: A Key Player in Nigeria’s Power Sector
Eko Electricity Distribution Company (Eko DisCo) is one of Nigeria’s 11 distribution companies unbundled from the defunct Power Holding Company of Nigeria (PHCN) in 2013. Serving over 700,000 customers across Lagos State and parts of Ogun State, Eko DisCo operates in one of Nigeria’s most economically dynamic and densely populated regions. Its market includes a diverse mix of residential, commercial, and industrial consumers, with a concentration of high-income neighborhoods, corporate headquarters, manufacturing hubs, and government establishments in Lagos, the country’s financial nerve center.
The company’s strategic importance is amplified by the socioeconomic profile of its customer base. Eko DisCo caters to areas with some of the highest electricity demand in Nigeria, driven by industries, financial institutions, and affluent households. However, despite its advantageous location, the company has faced significant operational challenges, including high technical and commercial losses, aging infrastructure, and the financial burden of non-cost-reflective tariffs. These issues have constrained its ability to provide stable power supply and generate sufficient revenue for reinvestment.
The recent acquisition of a 60% equity stake by Transgrid Enerco Limited is poised to address these challenges. With stakeholders such as North South Power (a major power generation company) and Axxela Limited (a leading gas distribution firm), the consortium brings critical technical expertise and financial resources. This investment is expected to enhance Eko DisCo’s infrastructure, boost efficiency, and improve service delivery.
By leveraging new capital, advanced technology, and emerging regulatory reforms, Eko DisCo aims to overcome its longstanding obstacles, better serve its diverse market, and contribute to the economic growth of the regions under its coverage.