FG Secures $500m World Bank Loan to Bolster Electricity Distribution

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In line with electricity tariff increment, the Bureau of Public Enterprises (BPE) disclosed that the Federal Government has secured a $500 million loan from the World Bank in a strategic move to address the gaps in the Electricity Distribution Companies (DisCos).

 

According to the BPE, approved on February 4, 2021, by the World Bank Board of Directors, the funding will support the Nigerian Distribution Sector Recovery Programme (DISREP) aimed at improving the financial and technical performance of the DisCos.

 

The BPE explained that the Distribution Sector Recovery Programme (DISREP) is designed to better the financial and technical operations of the DisCos through capital investment and financing of key components of their Performance Improvement Plans (PIPs), which was approved by the Nigerian Electricity Regulatory Commission (NERC).

 

In a statement, the Head of Public Communication of the Bureau of Public Enterprises (BPE), Amina Tukur Othman said “Key areas of improvement include: Bulk procurement of customer/retail meters and meter data management systems; implementation of a Data Aggregation Platform (DAP); strengthening governance and transparency within the DisCos; Programme Components, and the DISREP comprises two main components; programme for Results (PforR).”

 

Othman explained that $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 metres, a Data Aggregation Platform, and Technical Assistance”.

 

She also said that “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 privatisation agency 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.”

 

According to the BPE, significant progress can be seen in the preparation of the DISREP Programme, and several key milestones have been achieved, and “approval by the Federal Executive Council (FEC) on August 3, 2022; execution of the Financing Agreement by the Federal Ministry of Finance, Budget and National Planning, and the World Bank, adoption of the Programme Operations Manual (POM) by BPE and TCN, obtained Legal Opinion from the Attorney-General of the Federation, Execution of the Subsidiary Loan Agreement, effective declaration of the DISREP Programme on January 31, 2023, inauguration of the DISREP Technical Committee on May 6, 2024, inclusion in the Federal Government Borrowing Plan, approved by the Senate Committee on May 16, 2024.”

 

The agency also said that to ensure repayment assurance, “the Bureau of Public Enterprises sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatisation (NCP) for a structured repayment hierarchy.

 

“This structure prioritises payments as follows: Statutory Payments (Taxes); Repayment of CBN market loans; Market obligations; Repayment of DISREP loan; DisCos’ net revenue.

 

“This structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.”

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