The Bureau of Public Enterprises (BPE) has announced that the federal government has secured a $500m World Bank loan to foster electricity distribution in the country.
Gatekeepers News reports that the Bureau of Public Enterprise (BPE) made the announcement through a statement released by its head of public communication, Amina Othman on Thursday.
In February 2021, the World Bank approved $500 million to support Nigeria in improving the operations of electricity distribution companies (DisCos).
The Senate approved the loan on May 15 after President Bola Ahmed Tinubu requested to finance the mass metering programme of the federal government.
Updating the public, the BPE said the loan, under the bank’s distribution sector recovery program (DISREP), has been secured to alleviate the challenges faced by DisCos in Nigeria.
The bureau said, “In a strategic move to address the identified gaps in the electricity distribution companies, the Federal Government of Nigeria has secured a $500m loan from the World Bank.”
“Approved on February 4, 2021, by the World Bank board of directors, this funding supports the Nigerian Distribution Sector Recovery Programme aimed at improving the financial and technical performance of the Discos.”
“The DISREP aims to improve the financial and technical operations of DisCos through capital investment and financing of approved performance improvement plans, approved by the Nigerian Electricity Regulatory Commission (NERC).”
The bureau added that important areas to improve include bulk procurement of customer and retail meters and meter data management systems, implementation of a data aggregation platform (DAP), as well as strengthening governance and transparency within the DisCos.
Going on, the bureau said the DISREP comprises two main components. It said the first part is the programme for results with an allocation of $345 million and $155 million allocated for investment project financing (IPF).
The bureau added, “he $345 million has been allocated to support the implementation of selected PIP components; implementation by Bureau of Public Enterprises (BPE) and $155 million allocated for Investment Project Financing (IPF) for 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 bureau emphasized that the $500 million DISREP loan from the World Bank also offers better concessional financing than commercial bank loans.
It said, “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.”
The BPE further revealed that it obtained approval from the Federal Executive Council (FEC) on August 3, 2022.
According to FEC, the loan’s financing agreement between the Ministry of Finance, budget and national planning, and the World Bank has been executed as well as the adoption of the programme operations manual (POM) by BPE and Transmission Company of Nigeria (TCN).
The bureau said it has also obtained a legal opinion from the attorney-general of the federation and has carried out the subsidiary loan agreement.
The BPE said Effective declaration of the DISREP programme was carried out on January 31, 2023, and that the DISREP technical committee was inaugurated on May 6, 2024.
The bureau also revealed that the inclusion of the loan in the federal government borrowing plan was approved by the Senate committee on May 16, 2024.
In addition, the BPE said it has also obtained approval from the NERC and the National Council on Privatisation (NCP) for a structured repayment hierarchy.
The bureau said, “This structure prioritizes payments as follows: Statutory Payments (Taxes); Repayment of CBN market loans; Market obligations; Repayment of DISREP loan; DisCos’ net revenue.”
The structured repayment plan, according to BPE, aims to alleviate risks associated with repayment of uncertainty and defaults, with regulatory sanctions imposed for any defaults.
