The Nigerian federal government has obtained a $500 million loan from the World Bank to rectify the deficiencies found in the country’s electricity distribution companies (DisCos).
The Bureau of Public Enterprises (NPE) said in a statement that the financing is in support of the Nigerian Distribution Sector Recovery Programme, which aims to enhance the financial and technical performance of the DisCos.
Through capital investments and the financing of important elements of their Performance Improvement Plans (PIPs), which have been authorised by the Nigerian Electricity Regulatory Commission (NERC), the DisCos’ technical and financial operations are intended to be improved through the DISREP.
A Data Aggregation Platform (DAP) should be implemented, customer/retail metres and metre data management systems should be purchased in bulk, and the DisCos’ governance and transparency should be strengthened.
The funding will be used to pay for the acquisition of metres, a platform for data gathering, and technical support, BPE stated in a statement on Thursday.
The Nigerian Electricity Supply Industry (NESI) is anticipated to gain a great deal from the DISREP loan, especially from the Investment Project Financing (IPF) component. This is because the loan will close the metering gap, lower aggregate technical, collection, and commercial (ATC&C) losses, increase remittances and liquidity for the DisCos, and improve power supply reliability. According to BPE, the $500 million World Bank DISREP loan provides concessional financing on more favourable conditions than loans from commercial banks. As a result, among other things, the DisCos will be able to invest in vital distribution infrastructure, reduce ATC&C losses, boost power supply dependability, and attain financial sustainability in the power industry.
A number of significant milestones have been reached in the DISREP Program’s preparation, and on August 3, 2022, the Federal Executive Council (FEC) approved it. the World Bank, the Federal Ministry of Finance, Budget, and National Planning, as well as BPE and TCN, executed the financing agreement; acquired a legal opinion from the Attorney-General of the Federation; executed the subsidiary loan agreement; the DISREP programme became effective on January 31, 2023; the DISREP Technical Committee was established on May 6, 2024; and the programme was included in the federal government borrowing plan, which was approved by the Senate Committee on May 16, 2024.
The Bureau of Public Enterprises applied for and received clearance for a structured repayment hierarchy from the National Council on Privatisation (NCP) and the Nigerian Electricity Regulatory Commission (NERC) in order to guarantee payback assurance.
In accordance with the bureau’s statement, this repayment plan prioritises the following payments: statutory payments (taxes); market obligations; CBN market loan repayment; DISREP loan repayment; DisCos’ net revenue; and this structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.