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Banks Get Marching Order To Sell-Off Discos’ Shares
Banks holding majority stakes in six electricity distribution companies (DisCos) yesterday got a marching order from the Federal Government to divest within 12 months.
Minister of Power, Abubakar Aliyu, who gave the ultimatum, said the government was monitoring the operations and divestment process of the six DisCos to ensure compliance with the core objectives of restructuring the power firms.
He said the banks have been mandated to find serious investors to sell their 60 per cent equity in the Abuja, Kano, Kaduna, Benin, Ibadan and Port Harcourt DisCos.
Aliyu spoke in Abuja at the 11th edition of the ‘PMB Administration Scorecard Series (2015-2023)’ organised by the Federal Ministry of Information and Culture.
He said the government sacked the previous core investors to make them more responsible, adding that the government was determined to put the DisCos on their feet.
According to him, restructuring of the six Discos included the sacking of the previous core investors due to poor performance and the composition of a new board and management to run them.
The minister said: “For the benefit of the doubt when I say we have restructured the Discos this is just saying it mildly.
“Restructuring means that we have sacked the core investors. We have sacked the management and allowed the lenders to take over.
“Either banks or the Asset Management Corporation of Nigeria (AMCON) hold the franchise.
“So the banks have taken over 60 per cent ownership. We have allowed the banks, the Bureau of Public Enterprises (BPE) and the Central Bank of Nigeria (CBN) to take control.
“The lenders provided the chairmanship of the Discos. The BPE provided part of the management, including the managing directors and then the CBN provided the chief financial officer (CFO) and the auditor.
“So this is the position we are now with the six discos. They are Abuja, Kano, Kaduna, Benin, Ibadan and Port Harcourt. One may ask why only six? What about the rest?
“You know we have 11 of them. Three out of the 11 Discos are performing well, that is two in Lagos and one in Enugu. They are not doing badly.
“Jos Disco was re-concessioned in 2022 and Yola was re-concessioned last year. These two Discos are working very hard to improve. So we have to give time to settle down.
“In a way, we have restructured the whole of the 11 discos in one way or the other. Now, it is to help them since we have made them more responsible.
“We are trying to help them to get on their feet.”
The minister spoke about the Nigeria Distribution Sector Recovery Programme (DISREP).
He said: “It is a loan of $500 million which initially we refused to take for the Discos because of their situation. We don’t trust the way things have been handled.
“So, the loan has been there with the World Bank since last year but we did not take it until when we were able to restructure.
“Even now that Mr. President has approved through the Federal Executive Council, the DISREP, there are some conditions tied to them so that we can remove the risks attached to it. This is the situation.
“I hope and it is not going to be forever because banks are not in the business of providing electricity.
“So we have given them six months to one year to find someone serious to sell their 60 per cent equity to those in the business of electricity. This is the situation now and we are monitoring.”
He said the administration of President Buhari will bequeath 22,000MW capacity to the nation before leaving office next year, adding that Siemens was engaged in the power sector to raise the operational capacity from 7000 MW to 11, 000MW and 25, 000MW in 2025.
On tariffs, he said electricity is not a cheap commodity the world over.
He said Nigerians can cut costs by being careful about how they manage and use electricity, noting that the government was doing its best to protect lower-income citizens because of the nexus between lack of access to electricity and poverty.
The minister said: “We have service band from A to E. Accordingly, Band A will be provided with 22 hours of service. But they have to pay for it. Electricity is not a cheap commodity the world over.
“The cost of gas to power is being subsidised by the government by more than half to cushion the effects of electricity cost to the end users.
“The government used to fill up the gap. It used to be N600 billion per annum for the shortfall. But through some reviews we have been able to reduce it to N152 billion.
“Even at N152 billion the government pays in N152 billion, they take loans to pay in order to cushion the effect for all of us. And you know the situation of government finances nowadays. The government may not be able to continue doing that. We have to gradually live up to that.
“We have to be more careful about how we use electricity and how we are able to manage the electricity in order to reduce the cost by ourselves by using it when it is necessary. So this is the situation we are in.
“We have done all of this while protecting our lower-income citizens (that do not always receive adequate electricity) by maintaining subsidies for the lower tariff bands while allowing those with adequate power to pay relatively higher prices. Tariff shortfalls have been reduced by over 80 per cent and we are on the path to having a sustainable market that can pay for itself.
“We have put a focus on electricity poverty. It is proven through various studies that there is a strong nexus between lack of electricity access and poverty.
“Prior to this administration, there was no coherent policy on Rural Electrification with key provisions of the Electric Power Sector Reform Act to electrify rural populations largely ignored. “This administration established the Rural Electrification Fund that provides up to 70% grants for rural mini-grid and solar home systems. Currently REF has electrified more than 300,000 citizens in its short existence. The Ministry is working with REA to expand the Rural Electrification Fund to create more opportunities for rural access.”