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July 31, 2022

Electricity: FG owes DisCos N100bn – ANED

Full List: NERC unveils areas electricity tariff hike will affect in Lagos

By Obas Esiedesa, Abuja

The Association of Nigerian Electricity Distributors, ANED, has claimed that the Federal Government owes the 11 electricity distribution companies, DisCos, N100 billion in unpaid subsidies on electricity.

The group also accused the government of renationalizing five electricity distribution companies after their management were sacked and replaced with government appointed officials.

The companies were privatized and handed over to the private sector in November, 2013 but failure by the owners to meet up with loan repayments for the acquisitions has led to the takeover of the assets by banks.

A statement by the Executive Director, Research and Advocacy, ANED, Barrister Sunday Oduntan, yesterday, said the restructuring of the companies’ management were inconsistent with all the guidelines and processes necessary to comply with the framework of privatization agreements and the rule of law.  

Oduntan explained that the group was “deeply concerned about the recent “restructuring” of the five electricity distribution companies, as announced by the Bureau of Public Enterprises, BPE, on July 5th, 2022, in collaboration with the Nigerian Electricity Regulatory Commission, NERC.

He added: “We believe that it is reasonable to conclude that the resultant outcome has been an expropriation or backdoor renationalization of the DisCos by the Federal Government of Nigeria.

“Such renationalization or expropriation must be viewed through a historical context as necessary for a proper understanding of the performance challenges that the DisCos have been faced with since privatization. Fundamentally, the basis of privatization was flawed from the beginning, due to conditions that were not met by the FGN, while expecting the DisCos to meet their performance obligations. Not only were the investors short-changed because of insufficient and unreliable data that was provided by BPE to them during the privatization process, but the government also committed to and failed to deliver on the following –

“Debt-free financial books; Payment of Ministries, Department and Agencies electricity debts; N100 billion subsidy; Implementation of a cost reflective electricity tariff (this singular unfulfilled condition has led to accrued significant debt and liabilities on the DisCos’ financial books, as they continued to sell electricity below the cost price); and private management of the Transmission Company of Nigeria, currently, a government-owned and operated entity (a major requirement for attracting the private investment that is critical to addressing the transmission bottleneck that is currently belittling the Nigerian Electricity Supply Industry value chain”.

Oduntan noted that the Federal Government failed to meet its commitments over the post-privatisation period and “have belatedly been partially addressed – too late to rectify current performance challenges”.

He stated that “while the DisCos are not exonerated from responsibility for performance failures, it would be unrealistic to reach related conclusions without taking into consideration the factors that have been listed previously, as well as the FGN’s contributions to these challenges.

“Furthermore, there is an established process by which a change of a corporate entity’s Board of Directors and management occurs. As such, it is with much surprise that the DisCo investors awoke to the July 5th, 2022, renationalisation or expropriation of the five DisCos. More so, given that due process was not followed and that the FGN, as a 40 percent minority shareholder, is represented by the Director General of BPE on the Board of each of the DisCos and is party to all decisions concerning the operations of the DisCos”.