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Another government loan for DISCOs?

By Sunday Onyemaechi Eze

The Minister of Power, Works and Housing, Babatunde Fashola, recently in Kano made a startling and shocking disclosure regarding government’s willingness and readiness to give an unwarranted N39 billion loan to Distribution Companies (DISCOs) to meet the demand for electricity meter supply. The minister was quoted to have said the fund was meant to help distribution companies bridge the over 10 million metering gap in ensuring uninterrupted power generation and distribution.

This is in flagrant abuse of and in contravention of the privatisation policy of the power sector. The Power Sector Reform Act, 2005 did not confer on the Federal Government or the Minister of Power the privilege and or right to grant unwarranted soft loans to licensed companies in the power sector. Government’s business is primarily to raise standards, ensure fairness and obedience to the rules which, to a reasonable extent, have been breached by the companies even with government’s consent.

It is disturbing when those at the helm of affairs circumvent the rules and move on as if their actions are the best for us in all circumstances. The last time one checked, the Federal Government or the Ministry of Power was not listed as a commercial bank where individuals or companies take loans.

Therefore, to conceive the idea of assisting private businesses to flourish with government funds, when several unfinished people-oriented government projects dot every nook and cranny of Nigeria, is a disservice to the nation, which amounts to robbing Peter to pay Paul.

One of the reasons adduced by the spin-doctors of the federal government in favour of privatisation of power assets in Nigeria was that government has no business  doing business. It turned out a poor PR strategy and a deceptive mantra in government decision making process. They painted a horrid and disturbing picture of a precarious situation only redeemable by privatisation. A false high level of incompetence and corruption within the ranks of personnel in the power sector were the tales told to convince the authorities to sell without asking relevant questions.

The post-privatisation era is characterised by one step of development forward and many more backward. Those who championed the privatisation of the power sector would have loved to turn back the hands of the clock considering the major embarrassing quagmire facing the power sector today. Before privatisation, proponents dreamt of an utopian gold-plated private sector where only the new companies have the technical know-how and magic wand to ensure uninterrupted power supply without due consideration of their human and financial capabilities.  Do not forget that the companies were even dashed out to cronies as political patronage and also at ridiculous prices. Therefore, their result so far should not raise any eyebrows. Competences were utterly sacrificed on the altar of mediocrity in the selection processes of companies. Did Aliko Dangote grow his business empire by seeking for undue favour or running cap in hand to government for loans? 

These new companies are lukewarm and you cannot be lukewarm about a venture and expect it to be successful. Excellent corporate governance practice–“a key element in improving economic efficiency which involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders,” – is in short supply amongst most, if not all the licensed companies in the power sector.

It provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interest of the company and shareholders. Suffice it to say that, global brands are constructed on the pillars of strong character, discipline and long term visions not found in these licensed companies. The same problems bedeviling the power sector, which were the reason for privatization, are yet to be surmounted. Government and its representatives who are expected to raise the bar of efficiency and ensure compliance with the rules and standards are seen to have vested interest in a sector where they should ideally be supervisors.

What should bother government more is the level of disregard of extant rules guiding privatisation by the operators, not assisting them with loans. DISCOs were given the mandate to meter existing customers six months after take over. They are in breach of that mandate after four and a half years and none was sanctioned.

How many distribution companies have fulfilled their payment obligations to Nigeria Bulk Electricity Trader (NBET)? The latest Nigerian Electricity Regulatory Commission Q1 2017 Report on “DISCOs Performance” scored Ikeja Distribution Company 54% out of sundry key performance indicators employed in appraisal.

The government of former President Goodluck Jonathan gave out a whopping sum of N 213 billion intervention fund in 2015 for the same reason adduced by Fashola without any commensurate improvement or result. What internal control mechanisms have government and the Ministry of Power put in place to ensure checks and timely reimbursement? The question is: Do DISCOs deserve another government loan?

From the outset, the ideal situation would have been to allow those who took over the existing power assets to invest from the scratch in brand new companies of theirs to compete with NEPA or PHCN.

The level of corruption in the power sector since 1999 is endemic. In a research report entitled: “From Darkness to Darkness: How Nigerians are Paying the Price for Corruption in the Electricity Sector” published by Socio-Economic Right and Accountability Project (SERAP) in August, 2017 and presented to journalists at a 3-day training on electricity investigative reporting organised by Wole Soyinka Centre for Investigative Journalism (WSCIJ) in Lagos, “the total estimated financial loss to Nigeria from corruption in the electricity sector, starting from the return to democracy in 1999 to date, is over N11 trillion. This represents public funds, private equity and social investment (or divestments) in the power sector. It also projected that the loss is likely to surpass N20 trillion in the next decade given the rate of government investment in and funding of the sector amidst dwindling fortunes and recurrent revenue shortfalls. The much-touted reforms in Nigeria under the Electric Power Sector Reform Act of 2005 are yet to yield the desired and/or anticipated fruits largely due to corruption and impunity of perpetrators, regulatory lacunae and policy inconsistencies.”

The mystery behind the monumental fraud in the power sector since 1999 has remained a puzzle. Time to act is now. It is unwise to plant in another’s farm when yours lays fallow.

Eze writes via [email protected]

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