The Federal Government of Nigeria has secured a $500 million loan from the World Bank.
This was secured in a strategic move to address the identified gaps in the Electricity Distribution Companies (DisCos), explains the Bureau of Public Enterprises (BPE) in a statement signed by its Head, Public Communications, Amina Tukur Othman.
Approved on February 4, 2021, by the World
Bank Board of Directors, this funding supports the Nigerian Distribution Sector
Recovery Program (DISREP) aimed at improving the financial and technical
performance of the DisCos.
The Distribution Sector Recovery Program (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 (PIPs), which have been approved by the Nigerian Electricity Regulatory Commission (NERC).
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 and Program Components.
The statement clarified that the DISREP comprised two main components:
Program for Results (PforR) which has allocation of $345 million for the purpose of Supporting the implementation of selected PIP components. Then implementation by the Bureau of Public Enterprises (BPE).
Further, is investment Project Financing (IPF) with allocation of $155 million
meant for the purpose of financing the procurement of meters, a Data Aggregation
Platform, and Technical Assistance.
The DISREP loan, particularly the Investment Project Financing (IPF) component, is expected to significantly benefit the Nigerian Electricity Supply Industry (NESI) by: Closing the metering gap, Reducing Aggregate Technical, Collection, and Commercial (ATC&C)
losses; Improving remittances and liquidity for the DisCos, Enhancing the reliability of power supply, Increasing transparency and accountability within the DisCos.
BPE justified the $500 million DISREP loan from the World Bank, saying that it offers concessional financing with more favorable terms than commercial bank loans.
It said 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, Enhance transparency and accountability.
It recalled that significant progress had been made in the preparation of the DISREP Program, with several key milestones achieved, and approval by the Federal Executive Council (FEC) on August 3, 2022.
These include the 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, obtained Legal Opinion from the Attorney-General of the Federation, Execution of the Subsidiary Loan Agreement, effective declaration of the DISREP Program 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.
It disclosed that to ensure repayment assurance, the Bureau of Public Enterprises sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatisation (NCP) for a structured repayment hierarchy.
According to the BPE, this structure prioritizes payments as follows: Statutory Payments (Taxes), Repayment of CBN market loans, Market obligations, Repayment of DISREP loan, and DisCos’ net revenue.
This structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.
