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Nigeria: Mounting deficits raise concerns over bank takeover as Ikeja Electric reports $16mln pretax loss
Efforts by Nigerian banks to take over Sahara Group's power assets may be complicated by the deepening financial woes of Ikeja Electricity Distribution Company (Ikeja DisCo), which posted a pretax loss of N25.2 billion for the full year ended December 31, 2023.
The company's latest financials revealed worsening fundamentals that raised red flags for potential acquirers. Despite recording a 21.6 percent increase in revenue to N207.34 billion—up from N170.4 billion in 2022—soaring costs and operating inefficiencies continued to erode profitability.
Distribution and administrative expenses jumped 25.7 percent to N55.7 billion, while net finance costs surged by 70 percent to N10.34 billion in 2023. A tax credit of N21 billion helped cushion the blow, reducing after-tax loss to N4.1 billion from a previous profit of N33.96 billion in 2022. Nonetheless, accumulated deficits rose to a record N177.05 billion from N172.88 billion a year earlier, highlighting the company's persistent losses.
Among the most pressing concerns is a tariff shortfall of N83.64 billion and trade payables totaling N115 billion. The company's current liabilities of N183.46 billion far exceed its cash and bank balance of N23.01 billion, resulting in a negative working capital of over N160 billion.
Employee benefit expenses stood at N12.47 billion, while staff welfare and contract labor costs added N121.89 million and N1.64 billion, respectively—bringing total personnel-related spending to N14.52 billion. Repairs and maintenance expenses were N2.4 billion.
Ikeja DisCo's biggest expense remains energy purchases, with the company spending N215.31 billion on electricity sourced from the Nigerian Bulk Electricity Trading (NBET) Plc. This accounts for the lion's share of the company's rising cost of sales.
Total loans and borrowings stood at N39.2 billion, while total financial liabilities—including trade and other payables (excluding statutory deductions)—amounted to N173.94 billion.
Analysts say the company's prolonged losses and weak balance sheet make it a less attractive asset for lenders aiming to recover outstanding debts.
Ikeja DisCo is a beneficiary of the Central Bank of Nigeria's (CBN) Operating Expenditures (OPEX) loan, a special facility designed to support power distribution companies in meeting their minimum market remittance obligations and operational expenses.
The 10-year loan was extended at a subsidised interest rate of five percent annually up to February 28, 2023, and nine percent thereafter.
In addition, the company secured a N2.9 billion loan from Sahara Power Group Limited on May 1, 2022. This 12-month facility, offered at an 18 percent interest rate, was used to finance technical upgrades.
By the end of 2023, the full amount had been drawn, up from N2.4 billion in 2022. Another loan agreement worth N3 billion was executed in April 2023, also at 18 per cent interest over 24 months, with N1.6 billion disbursed by year-end.
Ikeja DisCo's troubling financial position comes amid an ongoing legal battle between Sahara Group and a consortium of Nigerian banks seeking to recover loans said to total N1.1 trillion.
The banks involved include Access Bank, First Bank, Zenith Bank, UBA, Union Bank, FCMB, Fidelity Bank, Keystone Bank, and Sterling Bank.
Through their appointed trustee, First Trustees Limited, and facility agent, FBNQuest Merchant Bank, the banks appointed Kunle Ogunba (SAN) as receiver over Sahara's assets on July 19, 2025. In response, Sahara Group swiftly filed lawsuits to halt the receivership process.
On August 5, 2025, the Federal High Court in Lagos, presided over by Justice Akintayo Aluko, issued an injunction restraining the banks and the appointed receiver from taking adverse actions against the power companies. The ruling protects Egbin Power Plc, Ikeja Electric Plc, and First Independent Power Limited (FIPL) from enforcement actions related to the disputed debt.
Babatunde Osadare, Chief Legal and Regulatory Officer of Ikeja Electric, said the ruling bars the receiver from accelerating the loan, interfering in business operations, enforcing share security, or acting unilaterally on financial documents.
Ikeja Electric Plc operates within a franchise covering six business units: Ikeja, Oshodi, Shomolu, Ikorodu, Akowonjo, and Abule-Egba. The company acquired these assets in 2013 during the federal government's power sector privatization program.
The assets were sold to the New Electricity Distribution Company (NEDC) consortium—comprising Sahara Group and Korean Electric Power Corporation (KEPCO), which serves as the technical partner. Ownership was formally transferred on November 1, 2013.
Kepco Energy Resources Limited holds a 70 percent stake in Egbin Power Plc; NG Power HPS Limited, a Sahara subsidiary, owns 70 percent of First Independent Power Limited while New Electricity Distribution Company Limited controls 70 percent of Ikeja Electric.
Analysts believe that with mounting liabilities, ballooning deficits, and a court-ordered injunction freezing lender actions, the future of Sahara Group's energy holdings—including IkejaDisCo—remains mired in uncertainty. For banks, the combination of weak financial performance and legal obstacles poses significant challenges in their pursuit of loan recovery.
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