The Federal Government of Nigeria has secured a $500 million loan from the World Bank to address significant gaps in the country’s Electricity Distribution Companies (DisCos). This funding will support the Nigerian Distribution Sector Recovery Programme (DISREP), aimed at enhancing the financial and technical performance of DisCos, as stated by the Bureau of Public Enterprises (BPE).
Objectives and Key Areas of Improvement:
The DISREP initiative is designed to improve the DisCos’ financial and technical operations through substantial capital investment. The program will finance key components of their Performance Improvement Plans (PIPs), which have been approved by the Nigerian Electricity Regulatory Commission (NERC). Key areas targeted for improvement include:
– Bulk Procurement of Meters: Acquisition of customer/retail meters and the establishment of meter data management systems.
– Data Aggregation Platform (DAP): Implementation of a DAP to enhance data management and operational efficiency.
– Governance and Transparency: Strengthening governance structures and promoting transparency within the DisCos.
According to the BPE, the purpose of this financing is to support the procurement of meters, the development of a data aggregation platform, and the provision of technical assistance.
Benefits to the Nigerian Electricity Supply Industry (NESI):
The DISREP loan, particularly its Investment Project Financing (IPF) component, is expected to bring significant benefits to the Nigerian Electricity Supply Industry (NESI). Key anticipated outcomes include:
– Closing the Metering Gap: The loan will help reduce the metering gap, allowing for more accurate billing and reduced customer disputes.
– Reducing ATC&C Losses: By decreasing Aggregate Technical, Collection, and Commercial (ATC&C) losses, the efficiency and reliability of the power supply will improve.
– Improving Remittances and Liquidity: Enhanced financial operations will improve remittances and liquidity for the DisCos.
– Enhancing Power Supply Reliability: Investments in critical distribution infrastructure will bolster the reliability of power supply.
The $500 million DISREP loan from the World Bank offers concessional financing terms that are more favorable than those typically available through commercial banks. This will enable the DisCos to make critical investments in infrastructure, reduce losses, and achieve financial sustainability in the power sector.
Progress and Milestones:
Significant progress has been made in preparing the DISREP program. Key milestones include:
– Federal Executive Council (FEC) Approval: Approved on August 3, 2022.
– Financing Agreement Execution: Completed by the Federal Ministry of Finance, Budget, and National Planning, and the World Bank.
– Program Operations Manual (POM): Adopted by BPE and the Transmission Company of Nigeria (TCN).
– Legal Opinion and Subsidiary Loan Agreement: Obtained from the Attorney-General of the Federation and executed respectively.
– Program Declaration: Effective as of January 31, 2023.
– Technical Committee Inauguration: Conducted on May 6, 2024.
– Federal Government Borrowing Plan: Included and approved by the Senate Committee on May 16, 2024.
To ensure the assurance of repayment, the Bureau of Public Enterprises sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC).
This loan marks a significant step towards addressing the challenges in Nigeria’s electricity distribution sector, aiming to create a more reliable and sustainable power supply system across the country.
