Eleven electricity distribution companies (Discos) will have external auditors look into their books to enable them access the World Bank’s $750 million facility, sources close to them told The ICIR.
The step is geared towards having a defined credible electricity market and addressing liquidity concerns in the power sector.
Several calls to DisCos were not picked but a credible industry source confirmed the development, saying that the move would revivify the troubled electricity industry.
“If you look at the joint stakeholders’ committee on accessing the World Bank facility and the leading role of the Central Bank of Nigeria, a lot of progress has been made. There are key outlined expectations and conditions. Most of the steps have been met by the system. The last part is the auditing of the DisCos by external bodies, after which the government can be prepared to access the World Bank interventions in the power sector,”an Energy Lawyer and Power Sector Governance Expert Chuks Nwani told The ICIR.
He noted, however, that some of the other steps being taken by the Nigerian Electricity Regulatory Commission (NERC) had not been perfected, forcing the government to pay subsidy in the sector.
But Nwani said that the issues were gradually being addressed.
“The government still pays subsidies in the power sector to bridge the liquidity shortfalls and ensure various value chain players are paid. For instance, the issue of bi-annual tarrif review, as prescribed by the Electricity Power Sector Reform Act of 2005 is currently in the works. The introduction of service reflective tarrif is also helping, but not perfect.”
The DisCos remain a key part of the power sector value chain as they collect the electricity bills from the power consumers and facilitate payment to other value chain players as prescribed by Electricity Power Sector Reform Act of 2005.
However, the constant liquidity challenge in the power sector and the weak remittance of revenue by the DisCos have made the government escrow their account to bridge the payment gap.
Nwani explained that there were plans to automate transformers, feeding various locations across the country to monitor power delivery efficiency and effective cost recovery.
The Nigerian government has been intensifying efforts towards ensuring that it draws from the World Bank’s intervention support of $750 million to ensure mass metering and network improvement for the ailing power sector.
The government has pushed for credible market reforms in the power sector with some bold steps such as a bi-annual minor tarriff review, consideration of exchange rate variables and inflation rates, and mass metering of power consumers.
The World Bank and other development institutions have tied most of their intervention support to credible electricity market reforms in Nigeria.
Industry analysts say the increased push by the regulator to drive an investor-friendly electricity market can be ascribed to positive steps from the World Bank, the Central Bank of Nigeria, the NERC, and other industry stakeholders in the electricity market.
“Most of the positives we are seeing today is one of the demands of the World Bank in lending us support to drive a credible electricity market. I can confirm to you now that Nigeria has set a minimum threshold to draw World Bank’s facility support with the persistent market reforms being undertaken currently by the regulator -NERC,” a Power Sector Governance Expert and Principal Partner of Nexier Power Emeka Okpukpara told The ICIR.
He noted further that the reforms were strategic now and could lead to improved industrialisation of the economy as more companies would be willing to come into the country on the back of improved power and kick-off of the African Continental Free Trade Agreement.
President Nigerian Consumer Protection Network and member of the National Technical Investigative Panel on Power System Collapses Kunle Kola Olubiyo noted that tarriff increase was a regulatory function and investor-friendly decision to grow the sector and make the electricity market whole.
“The takeaways from the service-reflective tariffs/service-based tarriff is that it will increase cash flow, make the electricity market whole, increase the cash flow remittances to NERC as an institution that gets some percentages of market shares of remittance to the operators.
“It would further increase the share of remittances to the Transmission Company of Nigeria (TCN) which gets their share of the market through transmission service charges and transmission wheeling charges,” Olubiyo said.