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Restructuring the Discos

We welcome the Federal Government’s plan to restructure the eleven electricity distribution companies (Discos). The initiative, which will be carried out in conjunction with the World Bank, is expected to boost the performance of the companies and ensure efficient service delivery. The restructuring is in line with the Power Sector Recovery Programme (PSRP- 2017-2021), which lays out plans to revamp the power sector, boost the financial capacity of Nigeria Bulk Electricity Trading (NBET) and improve the visibility of the Discos.           

It also focuses on supporting the implementation of the power sector reform, reducing losses in the distribution companies, improving access to electricity services and mobilising private sector investment.                

Although the PSRP was approved by the Federal Executive Council (FEC) in March, 2017, with the financial commitment of the World Bank to its implementation, little has been done, eight months after. It is, therefore, appropriate to begin the reform process in earnest by restructuring the discos, some of which have become insolvent and require new capital injection.  It is also heartwarming that the action plan made recommendations for the Nigeria Electricity Regulatory Commission (NERC), the Bureau of Public Enterprise (BPE) and other relevant parties to engage the Discos. We also support the recommendation that in the event of a possible takeover of any of the distribution companies, technical competence and forensic audits should be carried out.                                          

 Considering the importance of the power sector in the economy of any country, nothing should be allowed to impede progress towards meeting Nigeria’s energy requirement. There is no doubt that the sector faces multiple challenges relating to infrastructure and liquidity. It is time for the country to articulate a comprehensive solution to these problems. So much money has been pumped into the sector since the restoration of democracy in 1999. The people should be able to enjoy the benefits of these investments.

The Federal Government had, in 2011, launched a series of power sector reforms which resulted in the unbundling and privatisation of electricity generation and distribution companies (Gencos/Discos) in 2013.

The initial design of the reforms envisaged four stages of development which would ultimately lead to a competitive, efficient and private sector-driven power sector, that would be regulated by NERC, with the Ministry of Power providing general policy oversight.                    

Unfortunately, four years after the Gencos and Discos came on stream, the initial enthusiasm that heralded their emergence has waned. According to statistics, Nigeria has the capacity to generate 13,000 megawatts (MW) of electricity, out of which only 8,000MW is available. However, less than 4,000MW has reportedly been dispatched on the average over the last two years due to constraints in gas supply, electricity transmission and distribution. Consequently, it is not surprising that lack of constant electricity supply has affected consumers’ willingness to pay bills, leading to a significant shortfall in the revenue available from tariffs.                 

It is, indeed, lamentable that in spite of the huge investments in the power sector, the country is still far from meeting its energy needs. This has forced many industrial companies to relocate to neighbouring countries, while many others shut down, with resultant job losses and loss of tax returns to government.  

Whatever reforms government intends for the power sector should include other sources of power generation such as coal, solar and hydro. This is the time to renew interest in, and improve investment in them for the national good. It is obvious that no substantial progress can be made in the economy and many other areas of human development without stable power. Optimal power generation and transmission will help in the diversification of the economy.        

We agree with the World Bank’s assessment that the nation’s power sector that is characterised by poor service and illiquidity has led to “macro-economic imbalances” and become “a binding constraint” to the overall growth of Nigeria. This is the grim reality of the Nigerian power sector conundrum. 

The government and its relevant agencies should work in concert to effect a proper restructuring of the ailing power companies and ensure the implementation of the Power Sector Recovery Programme.


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July 2018
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