Discos Slam FG For Failing To Provide N100 Billion In Electricity Subsidies

By Adeleye Kunle

Nigerian electricity distribution companies (Discos) have chastised the federal government for failing to release the N100 billion subsidy on electricity since the sector’s privatisation, according to Track News.
This comes as stakeholders in the power sector expressed their continued opposition to the Federal Government’s planned takeover/restructuring of five Discos via the Bureau of Public Enterprises (BPE).

Discos characterized the move as a backdoor renationalization of power companies. They claimed that BPE underpaid investors in the 11 Discos when the facilities were privatized in November 2013.

According to Track News, the Federal Government announced through BPE the planned takeover of Kano, Benin, and Kaduna electricity distribution companies by Fidelity Bank Plc after the bank initiated action to take over the three Discos’ boards.

The government also announced that, as a result of the Asset Management Corporation of Nigeria’s takeover of Ibadan Disco, the bureau had obtained permission from NERC to appoint an interim managing director for the distressed power firm.

Discos have continued to oppose the development and have filed new lawsuits to avoid the government and bank takeover.

It is also understood that there is a schism between both parties, as they receive both praise and criticism from power sector experts.

The government stated in its restructuring notice that it was restructuring the management and board of Port Harcourt Disco to prevent the utility from going bankrupt.

The notice was signed by Alex Okoh, Director-General of BPE, and Sanusi Garba, Executive Chairman of NERC.

Sunday Oduntan, ANED’s Executive Director of Research and Advocacy, stated on Sunday that the restructuring was incompatible with all of the guidelines required to comply with the framework of privatisation agreements and the rule of law.

“We believe it is reasonable to conclude that the resultant outcome was an expropriation or backdoor renationalisation of the Discos by the Federal Government,” he said.

In a statement issued yesterday in Abuja, ANED argued that such renationalisation or expropriation must be viewed through a historical context in order to properly understand the performance challenges that the Discos have faced since privatisation.

“Fundamentally, the basis of privatisation was flawed from the start due to conditions that were not met by the Federal Government while expecting the Discos to meet their performance obligations,” the statement continued.

“Not only were the investors taken advantage of due to insufficient and untrustworthy data provided by BPE during the privatisation process, but the government also committed to and failed to deliver on debt-free financial books; payment of ministries, departments, and agencies’ electricity debts; and N100 billion subsidy.”

It outlined other areas of government failure, such as its inability to implement a cost-reflective electricity tariff, emphasizing that this singular unfulfilled condition had resulted in significant debt and liabilities on Discos’ financial books, as Discos continued to sell electricity below the cost price.

ANED went on to say that the government had failed to privatize the Transmission Company of Nigeria, which is currently a government-owned and operated entity.

It stated that privatizing TCN was a major requirement for attracting private investment, which was critical in addressing the transmission bottleneck that was currently undermining the Nigerian Electricity Supply Industry value chain.

“These commitments have largely gone unfulfilled in the post-privatisation period and have only been partially addressed – too late to address current performance issues.”

“While the Discos are not exonerated of responsibility for performance failures,” ANED said, “it would be unrealistic to reach related conclusions without taking into account the previously listed factors, as well as the Federal Government’s contributions to these challenges.”

“Furthermore, there is an established process by which a corporate entity’s board of directors and management are changed,” it added. As a result, the Disco investors were taken aback when they learned of the five Discos’ renationalisation or expropriation on July 5, 2022.”

The association claimed that due process was not followed and that the Federal Government, as a 40% minority shareholder, was represented on the boards of each of the Discos by the director-general of BPE and was a party to all decisions concerning the Discos’ operations.

This article first appeared on Track News.