The Federal Government says it has secured a $500million loan from the World Bank to help address the identified gaps in the operations of the electricity distribution companies (DISCos).
The Bureau of Public Enterprises (BPE) said in a statement in Abuja on Thursday that approval for the facility was given by the World Bank Board of Directors on February 4, 2021, to provide funding supports to the Nigerian Distribution Sector Recovery Programme (DISREP) aimed at improving the financial and technical performance of the DisCos.
The Distribution Sector Recovery Programme (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) 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), and strengthening governance and transparency within the DISCos programme Components.
The DISREP comprises two main components, namely Programme for Results (PforR); Allocation of $345 million to support the implementation of selected PIP components.
Implementation of the programme is by the Bureau of Public Enterprises (BPE); Investment Project Financing (IPF), with an allocation of $155 million with 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 and increasing transparency and accountability within the DISCos. The $500 million DISREP loan from the World Bank offers concessional financing with more favourable terms than commercial bank loans. This would enable the DISCos to invest in critical distribution infrastructure; improve ATC&C losses; increase power supply reliability, enhance transparency and accountability, and achieve financial sustainability in the power sector.
Significant progress has been made in the preparation of the DISREP Programme, with several key milestones achieved, and approval by the Federal Executive Council (FEC) on August 3, 2022; execution of the Financing Agreement by the Federal Ministry of Finance, Budget and National Planning, and the World Bank, adoption of the Programme Operations Manual (POM) by BPE and the Transmission Company of Nigeria (TCN), obtained Legal Opinion from the Attorney-General of the Federation, Execution of the Subsidiary Loan Agreement, effective declaration of the DISREP Programme 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.
To ensure repayment assurance, the BPE sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatisation (NCP) for a structured repayment hierarchy, which prioritizes payments, including 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.