In a calculated effort to fill the gaps found in the Electricity Distribution Companies (DisCos), the Federal Government has obtained a $500 million loan from the World Bank, according to the Bureau of Public Enterprises (BPE).
The BPE, which the World Bank Board of Directors approved on February 4, 2021, states that this investment is intended to help the Nigerian Distribution Sector Recovery Programme (DISREP), which aims to enhance the DisCos’ technical and financial performance.
According to the BPE, the purpose of the Distribution Sector Recovery Programme (DISREP) is to improve the DisCos’ technical and financial operations by financing the major elements of their Performance Improvement Plans (PIPs), which have been approved by the Nigerian Electricity Regulatory Commission (NERC), and making capital investments.
“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, and the DISREP comprises two main components; program for Results (PforR),” stated a statement released on Thursday by Amina Tukur Othman, Head of Public Communication at the Bureau of Public Enterprises (BPE).
Othman went on to say that $155 million has been set aside for Investment Project Financing (IPF) in order to finance the purchase of meters, a Data Aggregation Platform, and Technical Assistance, and that $345 million has been designated to “Support the implementation of selected PIP components; implementation by Bureau of Public Enterprises (BPE)”.
“The Nigerian Electricity Supply Industry (NESI) is expected to significantly benefit from the DISREP loan, particularly the Investment Project Financing (IPF) component,” she continued. “This is because the loan will close the metering gap, reduce aggregate technical, collection, and commercial (ATC&C) losses, improve remittances and liquidity for the DisCos, enhance power supply reliability, and increase transparency and accountability within the DisCos.”
The BPE went on to say that concessional financing with better conditions than commercial bank loans is available through the $500 million World Bank DISREP program.
“Invest in critical distribution infrastructure; improve ATC&C losses; increase power supply reliability; achieve financial sustainability in the power sector, and enhance transparency and accountability,” stated the privatization agency.
A number of significant milestones have been reached in the preparation of the DISREP Program, according to the BPE, including “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; acquisition of a legal opinion from the Attorney-General of the Federation; execution of the Subsidiary Loan Agreement; effective declaration of the DISREP Programme 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
The statement went on to say that in order to guarantee payments, “the Bureau of Public Enterprises sought and obtained approval for a structured repayment hierarchy from the National Council on Privatization (NCP) and the Nigerian Electricity Regulatory Commission (NERC).”
The following payments are given priority under this structure: market obligations, DISREP loan repayment, statutory payments (taxes), DisCos’ net earnings, and market loan repayments from CBN.
“With regulatory sanctions imposed for any defaults, this structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults.”
