Economy

FG SECURE $500 MILLION WORLD BANK LOAN TO BOLSTER NIGERIAN ELECTRICITY DISTRIBUTION SECTOR

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By Odimmegwa Johnpeter, Abuja 

In a strategic  move  to address the  identified  gaps in the  Electricity  Distribution Companies  (DisCos),  the  Federal  Government  of  Nigeria  has  secured  a  $500 million loan from the World  Bank. Approved on February  4,  2021, by  the World Bank  Board  of  Directors,  this  funding  supports  the  Nigerian  Distribution  Sector Recovery  Program  (DISREP)  aimed  at  improving  the  financial  and  technical performance of the DisCos. This was contained in a statement signed by Amina Tukur Othman, Head, Communications.    

The  Distribution Sector  Recovery  Program  (DISREP) is  designed to  enhance the financial and technical operations of the DisCos through capital investment and the financing of key components of their Performance Improvement Plans (PIPs), which have been approved by  the Nigerian  Electricity  Regulatory  Commission (NERC). Key areas of improvement include: •  Bulk  procurement  of  customer/retail  meters  and  meter  data management systems. •  Implementation of a Data Aggregation Platform (DAP). •  Strengthening governance and transparency within the DisCos. •  Program Components •  The DISREP comprises two main components: •  Program for Results (PforR): •  Allocation: $345 million •  Purpose: Support the implementation of selected PIP components. •  Implementation: Bureau of Public Enterprises (BPE) •  Investment Project Financing (IPF): •  Allocation: $155 million  The  Purpose  is  to  finance  the  procurement  of  meters,  a  Data  Aggregation Platform, and Technical Assistance The DISREP loan, particularly the Investment Project Financing (IPF) component, is expected to significantly benefit the Nigerian Electricity Supply Industry (NESI) by: •  Closing the metering gap •  Reducing  Aggregate  Technical,  Collection,  and  Commercial  (ATC&C) losses •  Improving remittances and liquidity for the DisCos •  Enhancing the reliability of power supply •  Increasing transparency and accountability within the DisCos  The $500 million DISREP loan from the World Bank offers concessional financing with  more  favorable  terms  than  commercial  bank  loans.  This  will  enable  the DisCos to: 1.  Invest in critical distribution infrastructure. 2.  Improve ATC&C losses. 3.  Increase power supply reliability. 4.  Achieve financial sustainability in the power sector. 5.  Enhance transparency and accountability.  Significant progress has been made  in the  preparation of  the DISREP  Program, with  several  key  milestones  achieved,  and  approval  by  the  Federal  Executive Council (FEC) on August 3, 2022. execution of the Financing Agreement by the Federal Ministry of Finance, Budget and National Planning, and the World Bank, adoption of the Program Operations Manual (POM) by BPE and TCN, obtained Legal  Opinion  from  the  Attorney-General  of  the  Federation,  Execution  of  the Subsidiary  Loan  Agreement,  effective  declaration  of  the  DISREP  Program  on January  31,  2023,  inauguration  of  the  DISREP  Technical  Committee  on  May  6, 2024,  inclusion  in  the  Federal  Government  Borrowing  Plan,  approved  by  the Senate Committee on May 16, 2024.  To  ensure  repayment  assurance,  the  Bureau  of  Public  Enterprises  sought  and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and  the  National  Council  on  Privatisation  (NCP)  for  a  structured  repayment hierarchy. This structure prioritizes payments as follows: 1.  Statutory Payments (Taxes) 2.  Repayment of CBN market loans 3.  Market obligations 4.  Repayment of DISREP loan 5.  DisCos’ net revenue  This structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.

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