Banks Bar Power Discos from Loans

Commercial banks have reportedly barred the 11 electricity distribution companies (Discos) in Nigeria’s power sector from obtaining financial facilities to support their operations, the Association of Nigerian Electricity Distributors (ANED) has disclosed.

ANED said in a statement in Abuja on Monday, that the banks took this decision on the back of a N152.16 billion financial package from the Central Bank of Nigeria (CBN) allegedly written against their accounts, but which they have received only N49 billion.

ANED’s Director of Research and Advocacy, Mr. Sunday Oduntan, who signed the statement, stated that the loan was from the CBN-backed Nigeria Electricity Market Stabilization Fund (NEMSF) worth N213 billion.

The financial package was designed by the central bank to settle the debts incurred by the electricity market within the interim rule periods, as well as legacy gas supply debts owed gas suppliers by the defunct Power Holding Company of Nigeria (PHCN) but now transferred to the Nigerian Electricity Liabilities Management Company (NELMCO).

According to Oduntan, the breakdown of the fund’s disbursements so far shows that N58.45 billion which is about 27.8 per cent was designated for the Discos, while N152.16 billion (72.3 per cent) was for the power generation companies (Gencos), gas suppliers and other service providers.

He stated that some Discos from the N120 billion the CBN had disbursed since it commenced in 2015 have received only N49 billion.

Oduntan, also claimed that the N152.16 billion written in the name of the Discos were not for them, but that it was in their financial books.

“The debt encumbrance is a significant impediment to the Discos’ ability to borrow money to finance their capital investment, and their financing of the entire value chain,” said Oduntan.

He also spoke about the recent N701.9 billion approved for the Nigeria Bulk Electricity Trading Plc. (NBET) to pay the Gencos for power that would be supplied from January 2017 to 2019, saying that if the retail end of the market would be ignored by the government in its intervention, the N701 billion may not sustain the electricity market.

“It is a good first step towards resolving the market liquidity challenge and ensuring that the upstream operators are not financially distressed, but it is not a complete solution to the problem.

“As long as the retail end of the value chain continues to under-recover its cost, any possibility of the government recovering its intervention or fixing the ailments of the sector is an illusory one,” Oduntan stated.

ANED also claimed that the market still has an outstanding shortfall of over N800 billion which it added must be addressed urgently to ensure that the N701 billion loans to the NBET would be recovered.

Source: This Day Live