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

The federal government has secured a $500 million loan from the World Bank to address the identified gaps in Nigeria’s Electricity Distribution Companies (DisCos).

The funding supports the Nigerian Distribution Sector Recovery Programme aimed at improving the financial and technical performance of the DisCos, the Bureau of Public Enterprises (NPE) said in a statement.

The DISREP is designed to enhance the financial and technical operations of the DisCos through capital investment and the financing of key components of their Performance Improvement Plans (PIPs), which have been approved by the Nigerian Electricity Regulatory Commission (NERC).

Key areas of improvement include bulk procurement of customer/retail meters and meter data management systems; implementation of a Data Aggregation Platform (DAP); and strengthening governance and transparency within the DisCos.

“The Purpose is to finance the procurement of meters, a data aggregation platform, and technical assistance,” BPE said in a statement on Thursday.

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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 and enhancing the reliability of power supply BPE said the $500 million DISREP loan from the World bank offers concessional financing with more favourable terms than commercial bank loans. This will enable the

DisCos to invest in critical distribution infrastructure, improve ATC&C losses, increase power supply reliability and achieve financial sustainability in the power sector among others.

“Significant progress has been made in the preparation of the DISREP Program, with several key milestones 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 Program 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 Program 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.

“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; and this structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults,” the bureau said.