The Federal Government has secured a $500m World Bank loan to bolster Nigeria’s electricity distribution sector.
This was disclosed by the Bureau of Public Enterprises announced on Thursday, according to The Punch.
The power distribution companies in Nigeria have faced significant criticism for being the most vulnerable aspect of the nation’s power value chain, mainly due to numerous shortcomings on the part of the Discos.
Out of an estimated 13 million electricity consumers, approximately eight million registered power users are not metered by Discos.
In addition, Discos has been receiving complaints about inadequate power supply in numerous locations. Consumers who are on estimated billing are also alleging that Discos are engaging in extortion, along with other issues.
After the privatization of the electricity generation and distribution arms in November 2013, Nigeria has 11 power distribution companies. Since then, the Discos have faced challenges in meeting the needs of end users.
The BPE revealed on Thursday that a $500 million World Bank loan has been obtained to assist in addressing the numerous challenges facing the Discos.
“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 mentioned that important areas to enhance are the bulk purchasing of customer/retail meters and meter data management systems, putting into action a Data Aggregation Platform, and reinforcing governance and transparency within the Discos.
BPE said the DISREP comprises two main components.
The first item is the results-oriented program, which has been allocated $345 million. This is intended to assist in carrying out specific PIP components. The Bureau of Public Enterprises is to implement this.
The other component is the Investment Project Financing, with $155m allocated to fund the acquisition of meters, a data aggregation platform, and providing 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.
The concessional financing from the World Bank in the form of a $500m DISREP loan provides more favorable terms compared to loans from commercial banks.
“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.
The preparation of the DISREP program has seen significant advancement, with the accomplishment of several important milestones. These milestones were approved by the Federal Executive Council on August 3, 2022.
