Nigeria secures $500m World Bank loan to fund DisCos
May 31, 2024556 views0 comments
Business a.m.
The federal government has secured a $500 million loan from the World Bank to finance the country’s electricity Distribution Companies (DisCos).
The Bureau of Public Enterprises (BPE), which announced the development in a statement issued recently in Abuja, stated that the loan would help alleviate financing gaps in the distribution segment, which has long been regarded as one of the most problematic components of Nigeria’s electricity sector.
The statement, signed by Amina Othman, head, public communications, BPE, explained, “This funding supports the Nigerian Distribution Sector Recovery Programme (DISREP) aimed at improving the financial and technical performance of the DisCos.
“The 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).
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According to the BPE , the $500 million DISREP loan, secured from the World Bank, would provide DisCos with funding at more favourable terms than commercial bank loans.
In addition, the bureau outlined the two main components of the DISREP programme, which have been allocated $345 million and $155 million respectively. The Programme for Results is expected to support the implementation of selected PIP components, while the Investment Project Financing will fund the procurement of meters, a data aggregation platform, and technical assistance.
The privatisation agency identified other benefits of the World Bank-funded DISREP Programme to include; investments in critical distribution infrastructure, reduction of Aggregate Technical and Commercial (ATC) losses, increased power supply reliability, financial sustainability of the power sector, and enhanced transparency and accountability.
The bureau also highlighted the key areas of improvement that will be addressed through the DISREP programme, including: bulk procurement of customer/retail meters and meter data management systems; implementation of a Data Aggregation Platform (DAP); and enhanced governance and transparency within the DisCos.
In order to guarantee the successful repayment of the loan provided by the World Bank under the DISREP programme, the Bureau of Public Enterprises said it obtained approval from both the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatization (NCP) for a structured repayment hierarchy.
The bureau explained further that the structure prioritises payments as follows: Statutory Payments (Taxes); Repayment of CBN market loans; Market obligations; Repayment of DISREP loan; as well as DisCos’ net revenue.
“This structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.” it added.