Stanbic-IBTC Buys 60% Stake in Eko Disco

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.

 

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