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Economy | Power & Energy

Preparing Nigerian DISCOs for Innovative Financing and Technical Partners to Achieve Stability

Jul 11, 2022   •   by Ottoabasi Abasiekong   •   Source: WebTV   •   eye-icon 345 views

The recent announcement by the Federal Government through the Bureau of Public Enterprises, BPE and National Electricity Regulatory Commission, NERC of the restructuring of five major distribution companies brings to the fore the need for innovative financing and the engagement of technical partners (foreign). 

 

Mr. Muktar Mohammed, an energy analyst, made this point while providing his perspective on the recent development, which has been a significant talking point in the power sector. 

 

According to him, it was time to review the privatization process of the distribution segment of the power sector, with a proper audit and disclosure of the state of the DISCOs. 

 

Speaking further, he called for adopting a reasonable pricing regime that will improve service delivery and revenue for the DISCOs. 

 

He believed the DISCOs should work out modalities for innovative financing through the Nigerian capital market. The analyst urged the Bureau of Public Enterprises to facilitate the process for DISCOs to explore roadshows and create more awareness of investment opportunities. 

 

Looking at capacity and efficiency, he stated that the issue of engaging technical partners, especially global players like General Electric, has become inevitable for the DISCOs to create value in the power sector. 

 

He noted that the Nigerian Union of Electricity Employees resisted the option of DISCOs having technical partners, citing national security issues that have inhibited the power sector's growth.

 

"The power sector privatization of 2013 lacked transparency and the only stable DISCOs we have now are Ikeja and Eko located in Lagos, a leading industrial and business hub in Nigeria."

 

He pointed out that the distribution companies did not do due diligence before taking over the power assets because they only looked at the cash flow. 

 

"There is a need to address the legislations around the power generation and distribution within the federation. Nigeria's power sector should be unbundled completely to attract investments." 

 

On the concerns over the shape of the distribution companies in the country, he called on the Federal Government to address the bottlenecks in the power sector that can slow down reforms and possible investments.

 

Last week the Federal Government of Nigeria announced the restructuring of Kano Electricity Distribution Company (KEDCO), Ibadan Electricity Distribution Company (IBEDC), Benin Electricity Distribution Company (BEDC) Kaduna Electric, and Port Harcourt Electricity Distribution Company (PHED).

According to Proshare Research, "This episode again brings the faults in the privatization process that produced the current operators in the distribution link of the electricity value chain. Since privatization, illiquidity has been a throbbing headache plaguing the Discos, threatening the entire sector and often requiring the intervention of the Central Bank. Future privatization processes must select reputable companies with the financial grit to invest in the sector."


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