18 April 2017

Nigeria: Power Investors Kick Against FG's Plan to Escrow DISCOs' Accounts

The 11 electricity distribution companies (Discos) under the aegis of the Association of Nigeria Electricity Distributors (ANED) have kicked against the plan by the federal government to escrow the revenue accounts of the distribution companies.

Executive Director of ANED, Sunday Oduntan, who also stated in a statement on Monday that the government had backslid in the N100 billion subsidy payment and other privatisation requirements, argued that any attempt to escrow the Discos' account would be tantamount to nationalisation or expropriation of the Discos.

"To date, the government has not met the privatisation transaction foundational requirements of providing N100 billion in subsidy to the sector. Indeed, any attempt at escrowing our accounts runs counter to the objectives of the National Electricity Power Policy, 2001 (NEPP) and the Electric Power Sector Reform Act, 2005 (2005), of a private sector-owned and managed electricity sector," Oduntan said.

He argued that it would also send very wrong signals to investors that Nigeria is not fully open for private sector investment but is still partial to the old habits of nationalisation, which prevents the injection of the cheap and needed capital that is critical to the rehabilitation and improvement of electricity infrastructure.

"You cannot have a supposedly private sector-owned and managed business in which the government now seizes control of its revenues. It is a contradiction in terms and practice. The same principle applies to any consideration of regulations or government action that intrudes into corporate responsibilities of procurement, financial management or personnel management," he said.

The Discos said they were not aware that the Nigerian Communications Commission (NCC) issued regulations to guide the internal procurements of the telecommunication companies.

"Singularly and in aggregate, such proposed action would endanger the ability of the government to hold the Discos responsible for performance, at a minimum, and at worse, amounts to government takeover of the Discos. It would absolutely, preclude further private sector investment in the sector," Oduntan added.

On plans to get Discos declare their eligible customers, ANED stated that eligible customers may only be declared by the minister when a competitive market exists in the Nigerian Electricity Supply Industry (NESI).

"Such market requires the presence and utilisation of industry contracts; competition and efficiency that will drive down electricity prices for the customers, and infrastructure that will allow for uninterrupted delivery of power to our customers," he said.

According to him, this competitive market does not exist, adding also that while Section 27 of EPSRA provides the minister with the authority to determine "end-use customers" who shall "constitute eligible customers, it also requires that any such determination must be consistent with Section 28 of the same act, which requires that Discos must be compensated for any reduction in their ability to "earn permitted rates of return on their assets or any inadequacy in their revenues, as a result of such determination".

Reacting to the N800 billion shortfalls in the sector, ANED further stated that the shortfalls undermine intervention objectives of the government.

"Similarly, continued failure to account for the outstanding market shortfalls that are currently in excess of N800 billion will essentially mean that the upstream operators remain in financial jeopardy, undermining one of the government's major objectives for the intervention - increased or improved liquidity," Oduntan said.

According to him, dearth of competitive market is a threat to the move by the government on the declaration of eligible power customers nationwide, and demanded compensation for any loss of revenue associated with such declaration.

Nigeria

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