National Issues
Stakeholders laud DisCos takeover, knock regulators for sector’s woes
• ‘Power supply won’t progress without takeover of DisCos, poor GenCos’
• Tsavsar: Blame government for power sector woes
Nigerians are gradually inching towards the moment of anagnorisis as bank-backed reforms in the nation’s electricity distribution companies (DisCos) are revealing the true state and regulatory gaps among the Bureau of Public Enterprise (BPE), Nigerian Electricity Regulatory Commission (NERC) and handlers of the 11 utility companies.
At least, five firms – Abuja DisCo, Benin DisCo, Ibadan DisCo, Kaduna and Kano DisCos – have fallen into the hands of the banks they took credit from after they were unable to break even eight years since they were licensed.
Coming at a time of global energy crisis with diesel now hovering around N850 per litre, as government spend heavily to subside Premium Motor Spirit (PMS), most stakeholders, yesterday, were divided between singing the praises of BPE and NERC, and blaming them for allowing the sector to fail in the first place.
The prevailing situation, which comes few days after NERC announced a contract-based electricity market, stakeholders said, may signal the worst days ahead for the sector, insisting that there already exists a breach of the national confidence reposed in BPE and NERC.
While the DisCos are jointly owned by individuals and the government, with the Federal Government represented on the board of all the companies, series of alarm being raised by industry players and consumers over the dismal performance of the firms have now come to limelight mainly because banks are moving to forcefully recoup their loans.
The payback loans notwithstanding, the DisCos are indebted heavily despite huge stimuli from the Federal Government and interventions from the Central Bank of Nigeria (CBN).
BPE and NERC had in a joint statement announced that the core share of 60 per cent of three DisCos’ were taken over due to default in their acquisition loans. The loans were taken in 2013 and drawn from Fidelity and AFREXIM Bank. New boards were swiftly approved while the Managing Directors of the DisCos were replaced.
Coming after takeover of Abuja DisCo and embattled challenges at Ibadan DisCo, NERC had tagged Jos, Benin, Kaduna and Kano as being distressed.
The Director-General of BPE, Alex Okoh and Executive Chairman of NERC, Sanusi Garba, had said: “Today, we were informed by Fidelity Bank that they have activated the call on the collateralised shares of Kano, Benin and Kaduna (Fidelity and AFREXIM) DisCos and that they have initiated action to take over the boards of these Discos and exercise the rights on the shares.
“Fidelity Bank’s action is a contractual and commercial intervention and is between the core investors in the DisCos and the lender. BPE is involved because of the 40 per cent shareholding of government in the DisCos.”
But stakeholders are worried that despite utility companies failing under the watch of BPE, which represents the Federal Government as well as NERC, which equally has all regulatory frameworks to make the sector perform, regulatory lapses contributed to the failure of the sector.
While electricity consumers pay for the inefficiencies of the sector under a Service Based Tariff arrangement, stakeholders are miffed that the current takeover by the banks remained pointer to poor corporate governance, technical and commercial losses as well as the dismal technical regulations in the power sector.
Recall that none of the DisCos, except Eko is currently able to meet minimum remittance order set by NERC, none of them has declared profit for eight years, none of them have also met the Key Performance Indicators (KPIs) set by the sector, leaving consumers to pay for minor repairs and maintenance due to the country’s energy situation.
While industries close down daily due to instability in the sector, energy expert at the University of Lagos, Prof. Yemi Oke, said BPE and NERC should share in the blame over poor performance of the DisCos.
“Who allowed those DisCos to fail? Who allowed the failed DisCos to do all the dirty things that brought them to their knees only to come out and scream that they are inefficient? Why is it only the DisCos that the banks are taking over on ground of insolvency? Did the GenCos not acquire assets with loan from banks? I’m told Mainstream, for instance, got a facility of about $120 million and they have since paid back everything and now making profit from their business,” Oke said.
According to him, Nigeria is in deep and serious energy crisis, adding that 80 per cent of the DisCos are technically insolvent; hence, the problems of the power sector may continue.
An energy lawyer, Madaki Ameh, stated that there was need for the total overhaul of the sector, insisting that the overhaul is long overdue and the takeover of the DisCos remained legally justified under the terms of the agreement, which brought them into the Nigerian Electricity Supply Industry (NESI).
He said the DisCos have not met any of the minimum thresholds set for them by government since privatisation despite the huge investment the government has continued to make in the sector.
“If you compare happenings in the power sector with the telecoms sector, you will see clearly that there were structural defects with the implementation of the privatisation policy in the power sector and that nothing short of a total take over of the DisCos and some of the non-performing GenCos would deliver the sort of efficiency required to transform the Sector in Nigeria,” Amehsaid.
Consumer rights advocate, Adetayo Adegbemle, noted that while BPE and NERC were only doing what they should do, the move was overdue.
“However, we must not lose focus of the fact that most of these restructuring is forced by core investors’ debt to third party, which is the banks at this point. This has not said anything about the actual performance of DisCos as an entity,” Adegbemle said.
According to him, NERC and BPE must do their performance appraisals and issue verdicts based on that across the DisCos.
Public-Private Partnership (PPP) consultant, Joseph Tsavsar, who participated in the privatisation process, said the prevailing situation showed the failure of government in its obligations.
To him, the private operators have no incentives to operate as provided in the privatisation agreement, no adequate energy, no cost reflective tariff and no wheeling infrastructure to wheel the power generated to DisCos above 4,000 megawatts, the same as it was before privatisation.
Adding that there is no independent regulatory body to properly regulate the sector, Tsavsar said a combination of all the failures was causing the current challenges.
“If you want to blame the investors as many do today, it will not change anything, government has to change their way of approach first. I said it before, the banks will be affected as most of the loans are considered bad loans. Taking over the DisCos by the banks will not bring any change, they may only be able to service the loans for now.”
The Nigerian Consumer Protection Network has, however, applauded the takeover of the DisCos, describing it as the right step.
President, Nigeria Consumer Protection Network, Kunle Kola Olubiyo, said with the DisCos’ licences being of 10-year tenure, government failed to conduct a mid-term review, adding that the DisCos failed on all benchmark.
“In the prevailing circumstances, we are on the same page with relevant stakeholders in the present effort to clean up the mess and free the economy held by its jugular by the non-performing utilities,” he said.
The Nigerian government spent a staggering $3.58 billion on servicing foreign debt within the first nine months of 2024, marking a significant 39.77% increase compared to the $2.56 billion expended over the same period in 2023.
This data, drawn from a recent report on international payment statistics by the Central Bank of Nigeria (CBN), reflects a concerning rise in the country’s foreign debt obligations amid depreciating currency values.
According to the report, the most substantial monthly debt servicing payment occurred in May 2024, totaling $854.37 million. This is a substantial 286.52% increase from May 2023’s $221.05 million.
Meanwhile, the highest monthly payment for 2023 was $641.7 million in July, underscoring the trend of Nigeria’s escalating debt costs.
Detailed analysis of monthly payments further illuminates the trend.
In January 2024, debt servicing costs surged by 398.89%, reaching $560.52 million, a significant rise from $112.35 million in January 2023. However, February saw a modest reduction of 1.84%, with costs decreasing from $288.54 million in 2023 to $283.22 million in 2024. March also recorded a decline of 31.04%, down to $276.17 million from $400.47 million the previous year.
Additional fluctuations in debt payments continued throughout the year, with June witnessing a slight decrease of 6.51% to $50.82 million from $54.36 million in 2023. July 2024 payments dropped by 15.48%, while August showed a 9.69% decline compared to 2023. September, however, reversed the trend with a 17.49% increase, highlighting persistent pressure on foreign debt obligations.
With the rise in exchange rates exacerbating these financial strains, Nigeria’s foreign debt servicing costs are projected to remain elevated.
The central bank’s data highlights how these obligations are stretching national resources as the naira’s devaluation continues to impact debt repayment in dollar terms.
Rising State Debt Levels Add Pressure
The federal government’s debt challenges are mirrored by state governments, whose collective debt rose to N11.47 trillion by June 30, 2024.
Despite allocations from the Federal Accounts Allocation Committee (FAAC) and internally generated revenue (IGR), states remain heavily reliant on federal transfers to meet budgetary demands.
According to the Debt Management Office (DMO), the debt burden for Nigeria’s 36 states and the Federal Capital Territory (FCT) rose by 14.57% from N10.01 trillion in December 2023.
In naira terms, debt rose by 73.46%, from N4.15 trillion to N7.2 trillion, primarily due to the naira’s depreciation from N899.39 to N1,470.19 per dollar within six months. External debt for states and the FCT also increased from $4.61 billion to $4.89 billion during this period.
Further data from BudgIT’s 2024 State of States report illustrates how reliant states are on federal support. The report revealed that 32 states depended on FAAC allocations for at least 55% of their revenue in 2023.
In fact, 14 states relied on FAAC for 70% or more of their revenue. This heavy dependence on federal transfers underscores the vulnerability of states to fluctuations in federal revenue, particularly those tied to oil prices.
The economic challenges facing both the federal and state governments are stark. The combination of mounting foreign debt, fluctuating exchange rates, and high reliance on federally distributed revenue suggests a need for fiscal reforms to bolster revenue generation and reduce vulnerability to external shocks.
With foreign debt obligations continuing to grow, the report emphasizes the urgency for Nigeria to address its debt sustainability to foster long-term economic stability.
Engr. Aderemi Oseni, representing Ibarapa East/Ido Federal Constituency of Oyo State in the House of Representatives, has called for a prompt investigation into the increasing occurrences of building collapses in major cities across Nigeria.
In a motion presented to the House on Wednesday, Oseni expressed deep concern over the alarming frequency of building collapses, emphasising the threat they pose to the lives and property of Nigerians.
The APC lawmaker, through a statement by his media aide, Idowu Ayodele, cited the recent collapse of a two-storey school building at Saint Academy in Busa Buji, Jos, Plateau State, on July 12, 2024. The tragic incident, which trapped 154 people and claimed 22 lives, is the latest in a series of similar disasters, raising serious concerns nationwide.
Oseni also referenced a report from The Punch newspaper, which revealed that Nigeria had recorded 135 building collapse incidents between 2022 and July 2024.
“This figure is alarming and unacceptable,” he stated, stressing the urgency of preventing further occurrences.
The Chairman of the House Committee on Federal Roads Maintenance Agency (FERMA), Oseni reminded the House that the Council for the Regulation of Engineering in Nigeria (COREN) and other relevant professional bodies are responsible for ensuring compliance with building standards and practices.
“Despite these regulatory frameworks, the recurring collapses suggest that enforcement is lacking. The loss of lives, properties, and resources is staggering, and this disturbing trend must be addressed immediately,” he remarked.
He proposed the formation of an Adhoc Committee to investigate the underlying causes of these collapses and recommend both immediate and long-term solutions.
Also, he urged the House Committee on Legislative Compliance to ensure swift implementation of any recommendations.
The House agreed to deliberate on the motion and is expected to present its findings and proposed actions within eight weeks.
The Vice-chairman of the Oyo Council of Obas and Chiefs, Oba Francis Olusola Alao, has expressed deep concern over the increasing involvement of religious leaders in material pursuits, accusing them of abandoning their spiritual duties in favour of wealth and influence.
Oba Alao, who is also the Olugbon of Orile Igbon, made this statement during a visit from the leadership of the Cherubim and Seraphim Church Movement “Ayo Ni O,” led by Baba Aladura Prophet Emmanuel Abiodun Alogbo, at his palace in Surulere Local Government on Thursday.
The monarch accused some religious leaders of sharing part of the blame for the moral and political crises that have engulfed the nation. According to him, spiritual leaders, once seen as the moral compass of society, have become compromised by corruption, aligning themselves with the very forces they should condemn.
Oba Alao was unapologetic in his criticism, stating, “Ninety-five percent of Nigerian leaders, both political and religious, are spiritually compromised.”
He argued that this moral decay among clerics has made it impossible for them to hold political leaders accountable or speak the truth to those in power, as their integrity has been eroded by their pursuit of material wealth.
“Carnality has taken over spirituality. Our religious leaders can no longer speak the truth to those in authority because their minds have been corrupted. Most of the so-called General Overseers (G.O.) are corrupt and perverted,” Oba Alao added.
He stressed that this shift towards wealth accumulation at the expense of spiritual values has greatly contributed to the country’s stagnation in development and social justice.
Olugbon urged both religious leaders and traditional rulers to reflect on their actions, reminding them that they would be held accountable for their stewardship, both in this world and the next.
“The prayers of sinners are an abomination before God, hence the need for our leaders to rethink,” he warned.
The monarch concluded by reiterating the transient nature of power and the importance of staying true to sacred duties, regardless of the temptation to indulge in worldly gains. “I am a traditional ruler. I don’t belong, and will never belong, to any occultic groups,” he emphasised, drawing a clear line between his position and the corrupt practices of some leaders.
In response to the Cherubim and Seraphim Church Movement’s request for collaboration on community development projects, Oba Alao assured them of his support.
“Your requests are aimed at the development of the Orile Igbon community. I am assuring you that necessary assistance will be provided in this regard.”
Earlier, Prophet Alogbo requested the monarch’s collaboration on a range of community development projects. These initiatives include the establishment of a women and youth empowerment center, clean drinking water initiatives, a bakery, animal production facilities, and farm produce processing.
Other proposals included a diagnostic and medical center, a full-size recreational sports facility, and a home care facility for the elderly.
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