The Bureau of Public Enterprises (BPE) has disclosed that the Federal Government has secured a $500 million loan from the World Bank to address gaps in the operations of Electricity Distribution Companies (DisCos).
Approved on February 4, 2021, by the World Bank Board of Directors, this funding supports the Nigerian Distribution Sector Recovery Programme (DISREP) aimed at improving the financial and technical performance of the DisCos.
The BPE explained that 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), which have been approved by the Nigerian Electricity Regulatory Commission (NERC).
Amina Tukur Othman, Head of Public Communication of the Bureau of Public Enterprises (BPE), stated on Thursday that “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.”
Othman elaborated that $345 million has been allocated to “Support the implementation of selected PIP components, to be executed by the Bureau of Public Enterprises (BPE),” while $155 million has been designated for Investment Project Financing (IPF) to fund the procurement of meters, a Data Aggregation Platform, and Technical Assistance.
She added that 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.
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The BPE further explained that the $500 million DISREP loan from the World Bank offers concessional financing with more favorable terms than commercial bank loans. 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.
According to the BPE, significant progress has been made in the preparation of the DISREP Programme, with several key milestones achieved, including 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 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, and inclusion in the Federal Government Borrowing Plan, approved by the Senate Committee on May 16, 2024.
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To ensure repayment assurance, the Bureau of Public Enterprises sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatisation (NCP) for a structured repayment hierarchy. This structure prioritizes payments as follows: 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.