Power Distribution: Nigeria Govt. secures $500m World Bank loan

The Federal Government has secured a $500 million World Bank loan to empower Nigeria’s energy distribution industry, the Bureau of Public Enterprises stated on Thursday.

The BPE announced that the financing has been secured to help address the numerous issues that Discos face in the country.

“In a strategic move to address the identified gaps in the electricity distribution companies, the Federal Government of Nigeria has secured a $500m loan from the World Bank,” BPE stated in a statement issued in Abuja by the Head of Public Communication, Amina Othman.

It added, “Approved on February 4, 2021, by the World Bank board of directors, this funding supports the Nigerian Distribution Sector Recovery Programme aimed at improving the financial and technical performance of the Discos.

“The 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, which have been approved by the Nigerian Electricity Regulatory Commission.”

The Bureau stated that key areas of improvement include bulk procurement of customer/retail metres and metre data management systems, implementation of a Data Aggregation Platform, and strengthening governance and transparency within the Discos.

On the programme components, BPE said the DISREP comprises two main components.

It said the first is the programme for results, with an allocation of $345m, adding that the purpose is to support the implementation of selected PIP components. The Bureau of Public Enterprises is to implement this.

The other component is the Investment Project Financing, with an allocation of $155m and the purpose is to finance the procurement of metres, a data aggregation platform, and technical assistance.

“The DISREP loan, particularly the Investment Project Financing component, is expected to significantly benefit the Nigerian Electricity Supply Industry by closing the metering gap, reducing Aggregate Technical, Collection, and Commercial losses, and improving remittances and liquidity for the Discos.

“Others include to enhance the reliability of power supply, as well as increase transparency and accountability within the Discos,” BPE stated.

It said the $500m DISREP loan from the World Bank offers concessional financing with more favourable terms than commercial bank loans.

“This will enable the Discos to 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,” the bureau stated.

It noted that significant progress has been made in the preparation of the DISREP programme with several key milestones achieved and approved by the Federal Executive Council on August 3, 2022.

It said there has been the execution of the Financing Agreement by the Federal Ministry of Finance, Budget and National Planning, and the World Bank, and adoption of the Programme Operations Manual by BPE and Transmission Company of Nigeria.

The government has also obtained a legal opinion from the Attorney-General of the Federation and executed the Subsidiary Loan Agreement, adding that the effective declaration of the DISREP Programme was done on January 31, 2023, while the inauguration of the DISREP Technical Committee was on May 6, 2024.

It said the inclusion in the Federal Government borrowing plan was 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 and the National Council on Privatisation for a structured repayment hierarchy.

“This structure prioritises 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,” BPE stated.

Power distribution companies in Nigeria have been widely criticised as being the weakest link in the country’s power value chain. This is due to many lapses on the part of the Discos.

For instance, about eight million registered power users out of an estimated 13 million electricity consumers are not metered by Discos. Also, there are complaints of poor power supply to many locations by Discos. Consumers on estimated billing also accuse Discos of extortion, among other concerns.

Nigeria got 11 power distribution companies after electricity generation and distribution arms of the industry were privatised in November 2013, and since then, the Discos have been struggling to meet the demands of end users.