Only N58 billion of the total N1.8trillion Federal Government’s (FG) power sector funding has been accessed by electricity Distribution Companies (DisCos), the umbrella body of the 11 DisCos, Association of Nigerian Electricity Distributors (ANED) on Wednesday said.
It said the accessed sum is from the Central Bank of Nigeria CBN-Nigeria Electricity Market Stabilisation Facility (NEMSF) N214bn loan facility, which is being repaid.
Executive Director, Research and Advocacy, Sunday Oduntain made the disclosure in a statement issued in Abuja, saying the accessed sum is deducted monthly by CBN, with about 10 per cent interest rate for 10 years.
He said the explanation became imperative following claims that power sector operators, including DisCos, were given N1.8trn “free” money by the Federal Government (FG) since privatisation.
The Senate President, Ahmed Lawan, at the opening session of a public hearing on “Power Sector Recovery Plan and the impact of COVID-19 Pandemic” organised by the Senate Committee on Power on Monday had said: “Government should not be giving free money. 1.8 trillion naira has been given to DisCos maybe in their books. The actual money might have been given to the GenCos.
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“Government cannot afford to just spend money that you hardly understand why it is given and I will advise the Executive that next time, to give such money, bring it to the National Assembly for approval.”
However, Oduntan explained that the CBN in 2014 provided N214bn NEMSF out of which DisCos were only able to access 3 per cent of the sum.
“And that is on the DisCos’ account books as collateral for our Letters of Credit (LC) which DisCos are repaying every month,” he added.
He stressed that the total fund was not only for the DisCos but to all players in the power sector, including the GenCos.
“The CBN NEMSF 1 fund was not a subsidy but a loan to address legacy gas debts and tariff shortfalls. The NEMSF Loans currently hamper DisCos’ balance sheets, worsened by the difference in Aggregate Technical, Commercial and Collection (ATC&C) loss as used in the Tariff Model in line with the reality,” the statement noted.
He further noted that the FG had in 2017, given a Payment Assurance Guarantee of N701.9bn to the GenCos through the Nigeria Bulk Electricity Trading Plc (NBET) to help the power stations meet their gas obligations to gas companies.
Oduntan added that another N600bn was approved for the GenCos in 2019 through NBET for similar purposes.
He reminded that at privatization, the N100bn commitment that was made by the government to cushion low pre-existing tariffs before the commencement of tariff setting was not implemented.
“If the N100bn subsidy was given to DisCos, it would have reduced the liability of the DisCos for better services,” he noted.
While also lamenting the impact of the COVID-19 on DisCos operations, he said; “As in other countries, recognition of hardship from COVID 19 should also be done by Nigeria.
“The Federal Government and its agents should embark on sensitisation campaigns informing customers of the benefit of paying their bills and the need for cost-reflective tariffs,” he advised.
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