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Fashola, DISCOs spat amid darkness

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Fashola, DISCOs spat amid darkness

From what has transpired in the last three years since this administration came into power, Nigeria obviously is still very far from extricating itself from the grip of darkness. Considering the series of disagreements, diatribes and frustration manifested by the Federal Government through the Minister of Works, Power and Housing, Mr. Babatunde Fashola (SAN), and power distribution companies under the umbrella of Association of Nigerian Electricity Distributors (ANED), everything points to the fact that the crisis in the power sector is deeprooted and requires thorough approach to tackle. Indeed, the seemingly endless spat between the minister and the DISCOs calls to question the fundamentals behind the privatization exercise.

 

As if there were no rules to the deal, confrontations between the minister and the power investors keep resonating every now and then, thereby adding to the frustration being faced by hapless Nigerians, who have always been victims of such power tussles. Accusations and counteraccusations have become the norm between the Federal Government and the DISCOs. In the latest and most lamentable row, Fashola had again expressed his misgiving over the state of the nation’s electricity distribution, a responsibility placed in the hands of the 11 distribution firms.

 

It is a known fact that the DISCOs have been crying out over debts owed them by the government agencies and their inability to recoup same. In the same breath, the minister accused them of owing the Nigerian Bulk Electricity Trading Company (NBET) about N800 billion, which they have also failed to pay up. Such bickering obviously becomes very embarrassing considering the fact that rules of engagements and mode of transaction must have been laid out during the process of privatization, which the Federal Government has allegedly refused to adhere to.

 

The dust that had been raised so far only points to the fact that Fashola and the DISCOs are working at crosspurposes and are not obviously on the same page. Yet the contentious issues are so fundamental to achieving power stability that unless both parties bury the hatchet, swallow the pride and sit round negotiation table, Nigerians will continue to wallow in the dark and we will all be the losers at the end of the day. At the core of the challenge confronting the DISCOs is the contentious issue of cost reflective tariff. The Electricity Power Sector Reform Act commits the Nigerian Electricity Regulatory Commission (NERC) to regulate a market in such a manner as to guarantee an electricity tariff that reflects the actual costs of generating, transmitting and supplying electricity to end users.

 

The cost reflective tariff is to ensure that the investor should entertain no fears about recovering his investment in addition to a decent margin as profit. This was the expectation of the investors who committed more than N1 trillion of both personal and borrowed funds to buy the electricity distribution assets in 2013. But is this the reality today?

 

The answer is a resounding no. As at today, while the average retail tariff is over N80 per kilowatt hour, the average retail price as approved by NERC for DISCOs is about N32 per kilowatt-hour

 

. Yet these investors, who are still reeling under huge indebtedness with its attendant ever-rising interest charges, are expected to source funds to provide the needed infrastructure in the vital sub sector. While it is not being suggested here that these investors are a band of angels and prefect beings who have kept strictly to the rules, we are nonetheless, stating emphatically that this strange business model where investors are expected to sell far below cost of production and are also expected to provide infrastructure requiring huge capital outlay, is not only unsustainable but a recipe for a total collapse of the power sector.

 

It is for the reason that we call on the authorities to expedite action on the Power Sector Recovery Programme (PSRP) and a programme that envisions that the market shortfall will be addressed.

 

The Federal Government should make yearly budgetary provision for funding of historical and future sector deficits. Also, there is need for the establishment of cost reflective tariffs across the board over the next four years, with a plan for a bilateral willingbuyer willing-seller for premium customers. We also call for a payment assurance facility to be established by the Central Bank of Nigeria (CBN) to support NBET. Similar funding initiatives, especially from the World Bank Group, IFC and MIGA running into billions of dollars, should be put in place. We are of the view that what these times call for is a robust and open dialogue among all stakeholders. The situation at hand requires all parties coming down from their high horses to put all the issues on the table, proffer workable solutions and ensure that the nation averts a power sector collapse.

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