Nigeria electricity coys say central bank market stabilization fund leaves power industry worse off
Bukola Odufade is Businessamlive Reporter.
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Nigeria’s electricity distributors, popularly called DisCos, have said that the country’s electricity market stabilization fund (NEMSF) has made the liquidity crisis in the industry much worse as they now find themselves encumbered by debt as it does not provide them with direct financial support.
Sunday Oduntan, executive director, research and advocacy of the umbrella body of the companies, the Association of Nigerian Electricity Distributors (ANED), described the fund as “a vehicle provided by the CBN to ease the beginning of the liquidity crisis that is much worse today. It is not a subsidy or a bailout, but a loan (repayable over a ten-year period) to the sector that is carried on the Discos’ financial books.”
The Central Bank of Nigeria (CBN) in November 2014 created the N210.6 billion fund in collaboration with the Ministry of Petroleum Resources, Ministry of Power and the Nigerian Electricity Regulatory Commission (NERC), to provide liquidity to the sector by settling the debt that arose during the interim period occasioned by the revenue shortfalls and to help the power firms clear the legacy debts wrapped around gas and contracts that lingered before the power sector privatization in November 2013.
However, DisCos claim that the CBN reserved just about N58.45 billion or 27.75 percent of its N213 billion power sector intervention fund for the DisCos, while the balance went to generation companies (GenCos), gas suppliers and industry service providers.
Oduntan stated that most of the money received by the DisCos under the intervention has been transferred to, or committed to banks, as necessary to put cash-backed Letters of Credit (LC) in place as requirement for the vesting contracts the DisCos have with the Nigerian Bulk Electricity Trading Plc (NBET).
Also, in response to allegations made against them by Babatunde Fashola, minister of power, works and housing, the DisCos who spoke collectively through the Association of Nigerian Electricity Distributors (ANED), said they were not rejecting financial support.
“We are not aware of any DisCos that have sought to reject the NEMSF funds or gone to court to frustrate the disbursement the funds, given that a percentage of the provided funds is legitimately owed by the market to the DisCos,” he said.
He also said that even though the government said it has verified MDAs debts to the DisCos, its MDAs were still accumulating monthly electricity debts.
“While the DisCos are appreciative of the initial reconciliation associated with the N27 billion but are concerned by the lack of good faith associated with the continued absence of an automatic mechanism for the payment of bills consumed by government MDAs,” he added.