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Home Business News

Why government, not Discos is behind Nigeria’s poor power supply

Onome Ohwovoriole by Onome Ohwovoriole
September 14, 2017
in Business News, Company News
TCN ready to waive Discos' N270 billion debt, TCN want Discos to recapitalise, Discos investment in power sector, AfCFTA, Gencos reacts to AfCFTA, Outsourcing companies in Nigeria, Grid systen collapse

A substation owned by a transmission company in Nigeria

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Power distribution operators (Discos) are of the opinion that government could be behind the troubles faced in the industry, which is resulting in poor power supply in the country. Captain Hosa Okunbo, one of the investors that acquired the Yola Distribution Company (DISCO) in an interview with Osasu Igbinedion of The Osasu Show,disclosed some of the burdens his company and other Discos are currently facing.

Broadly speaking, according to Okunbo,the Federal Government has not met most of the conditions under which they should operate as a distribution company (DISCO). Okunbo said:“the best thing that can happen today to us or to me is for government to take back the assets and pay us back our money”.

Why such a conclusion?

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One of the reasons for this is that government has refused to raise tariffs to allow discos recuperate their costs.

However, government may have been unable to meet this condition due to circumstances beyond its control. A proposed increase in electricity tariffs, has been put on hold due to a court case. Furthermore, the National Assembly is very strongly opposed to the move, due to concerns over the inability of a vast majority of Nigerians to afford high electricity tariffs. While the level of poverty is already high, purchasing power is being battered by high inflation, which is making basic commodities like food, expensive.

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Another reason that Okunbo points out as a debilitating factor is the fact that the Federal Government sold distribution assets to Nigerian investors in dollars, when it knew that the assets would generate revenue in Naira. To finance the acquisition of the assets, Nigerian investors took Dollar loans from Nigerian banks, and are still struggling with repaying both the interest and principal in Dollars. To worsen the situation, the CBN doesn’t recognize this loan repayment as an eligible transaction under its forex rules, making it extremely expensive for discos to repay their debts.

Okunbo opines that government should have sold the assets for cheap, so that investors could then gradually invest in them and improve them. But government, in its cash-strapped state, opted for revenues rather than making it easier for the problems to be solved.

Mr Dallas Peavey, MD of Egbin Power Plc had also recently complained of the company’s inability to function effectively due to the failure of the Federal Government to settle its debts.

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The inability of the DISCOs to generate adequate revenue, has led to difficulties in paying back loans for some of the investors. Banks, that lent the funds are also unwilling to make provisions for them, so as not to fall below regulatory limits set by the Central Bank of Nigeria (CBN).

Why a refund may not be possible

As reasonable as Captain Okunbor’s argument is, the possibility of government refunding the firm is quite slim. The funds generated from the privatization exercise have already been spent. Government itself is constrained by funds, and has had to borrow massively to meet budgetary obligations.

Government may also be unwilling to reverse the exercise as that would leave it saddled with the responsibility of generating, transmitting and distributing power in the country.

 

 

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Tags: DISCOSHosa OkunborNews ReviewNigeria’s poor power supplyPower Sector

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