The power Distribution Companies (DisCos) have never gotten any free money from the Federal Government. Out of the N1.8 trillion so far injected into the power sector, DisCos have only accessed N58 billion loan from the Central Bank of Nigeria (CBN) N214bn loan facility, which is being repaid.
This was contained in a statement by the Executive Director, Research and Advocacy at the Association of Nigerian Electricity Distributors (ANED), Barrister Sunday Oduntan on Wednesday. He said this explanation is necessary to help in setting the records straight as there is a belief that power sector operators including the DisCos have been given N1.8trn free money by the Federal Government since the 2013 power sector privatization.
At the opening session of a public hearing on “Power Sector Recovery Plan and the impact of COVID-19 Pandemic” by the Senate Committee on Power on Monday, the President of the Senate, Ahmed Lawan in his address said, “Government should not be giving free money. 1.8 trillion naira has been given to DisCos maybe in their books. The actual money might have been given to the GenCos.
“Government cannot afford to just spend money that you hardly understand why it is given and I will advise the Executive that next time, to give such money, bring it to the national Assembly for approval,” Lawan had said.
But ANED in the statement said only about three percent of the N1.8 trillion funding for the power sector has gone to the DisCos.
The association said CBN in 2014 provided N214bn Nigeria Electricity Market Stabilization Fund (NEMSF) but that the DisCos were only able to access N58bn of that till date, “and that is on the DisCos’ account books as collateral for our Letters of Credit (LC) which DisCos are repaying every month.”
The N214bn fund was not only for the DisCos but to all players in the power sector, including the GenCos, ANED said.
It noted that the federal Government gave the Payment Assurance Guarantee of N701.9bn to the GenCos in 2017 through the Nigeria Bulk Electricity Trading Plc (NBET) to help the power stations meet their gas obligations to sustain power generation.
Another N600bn was approved for the GenCos in 2019 through NBET for similar purposes. “However, the DisCos have only partaken in the N213bn NEMSF facility which is being deducted every month at source by CBN with about 10 percent interest rate for 10 years.”
ANED also reminded the government that at privatization, the N100bn commitment that was made by the government to cushion low pre-existing tariffs before commencement of tariff setting, was not implemented.
“The CBN NEMSF 1 fund was not a subsidy but a loan to address legacy gas debts and tariff shortfalls. The NEMSF Loans currently hamper DisCos’ balance sheets, worsened by the difference in Aggregate Technical, Commercial and Collection (ATC&C) loss as used in the Tariff Model in line with the reality.
“If the N100bn subsidy was given to DisCos, it would have reduced the liability of the DisCos for better services.” it noted.
The DisCos also decried cases of hardship caused by the COVID-19 pandemic. “As in other countries, recognition of hardship from COVID 19 should also be done by Nigeria. The Federal Government and its agents should embark on sensitization campaigns informing customers of the benefit of paying their bills and the need for cost reflective tariffs,” it advised.