CBN’s escrow of DisCos’ account promotes transparency in NESI ― Experts

Central Bank of Nigeria

Experts in the Nigerian Electricity Supply Industry (NESI) and financial sector have defended management of the accounts of the 11 distribution companies by the Central Bank of Nigeria (CBN) as this promoted transparency in the market.

By escrowing the bank accounts in 2020, the CBN allowed inflow of cash into the accounts but restricted withdrawals thus prioritising certain operations that the fund is used to avoid mismanagement.

The major priority for the move was to guarantee loan repayment to the Federal Government (FG) and ensure 100 per cent payment of market operators and Nigerian Bulk Electricity Trading Company (NBET’s) invoices.

According to experts, the development may have halted misappropriation of fund by the utility companies, introduced transparency, increase revenue, enable the government to recover monies loaned to the companies while reducing the financial burden in the sector.

Industry data also showed that between July and December 2020, revenue from the market grew by 10.55 per cent to N272.47 billion.

The Special Assistant to the President on Infrastructure, Ahmed Zakari, in his contributions said the account escrowing led to a significant increase in upstream remittance from DisCos toNBET/TCN.

He explained that the remittances have increased by over 100 per cent and aided liquidity flows to enable operations of the generation companies and Transmission Company of Nigeria (TCN).

“The visibility provided by the escrow system has also aided NERC’s regulatory oversight of the DisCos while also providing data which is being used to independently evaluate sector performance and impact of various interventions being embarked on in the sector,” Zakari said.

On his part, Former Chairman, Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, insisted that the gains in the revenue may remain elusive if it doesn’t translate to improved operations of the DisCos.

He noted that the purpose of the escrow was to enable the CBN to recover its fund so that: “it is not frittered away or used by the DisCos to finance their investment.

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Also, Former Managing Director, NBET, Rumundaka Wonodi, noted that, while it is critical to ensure effective performance of DisCos, the account escrowing ensured transparency in the sector.

“So far it had helped in increasing revenue in the sector. So many people have accused the DisCos or poor remittances, the initiative will make everything open. But it needs to be widened,” Wonodi said.

Market Operator, Transmission Company of Nigeria (TCN), Edmund Eje, said the move brought about payment discipline in the market.

“By the CBN escrow intervention, therefore, it will be difficult for any DisCos to misappropriate their monthly revenue collection, as the CBN’s Special Purpose Vehicles (SPVs), Meristem monitors all the DisCos commercial banks through which every DisCos revenue is remitted,” he added.

However, he advised that the CBN intervention could be complemented with the Market Operator’s instruments, which includes that every DisCos must have an updated Bank Guarantee with the MO and Meristem and should timely update the MO of the Disco’s performance.

Adetola Bademosi