FG secures $500m World Bank loan to aid electricity distribution

The Bureau of Public Enterprises (BPE) says the federal government has secured a $500m World Bank loan to boost electricity distribution in the country. 

The Bureau of Public Enterprise (BPE) announced the World Bank loan in a statement on Thursday, signed by Amina Othman, its head of public communications. 

In February 2021, the World Bank approved $500 million to support Nigeria in improving operations of electricity distribution companies (DisCos). 

The loan was approved by senate on May 15 after a request by President Bola Tinubu to finance the mass metering programme of the federal government.

Providing updates, the BPE said the loan, under the bank’s distribution sector recovery program (DISREP), has been secured to mitigate the challenges faced by DisCos in the country.

“In a strategic move to address the identified gaps in the electricity distribution companies, the Federal Government of Nigeria has secured a $500m loan from the World Bank,” BPE said. 

“Approved on February 4, 2021, by the World Bank board of directors, this funding supports the Nigerian Distribution Sector Recovery Programme aimed at improving the financial and technical performance of the Discos.

“The DISREP aims to improve the financial and technical operations of DisCos through capital investment and financing of approved performance improvement plans, approved by the Nigerian Electricity Regulatory Commission (NERC).”

The bureau said key areas of improvement include bulk procurement of customer and retail meters and meter data management systems, implementation of a data aggregation platform (DAP), as well as strengthening governance and transparency within the DisCos.

The bureau said the DISREP comprises two main components. 

The first part, BPE said, is the programme for results with an allocation of $345 million and $155 million allocated for investment project financing (IPF).

“The $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 meters, a Data Aggregation Platform, and Technical Assistance,” the statement further reads.

“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.” 

‘CONCESSIONAL FINANCING’

The BPE said the $500 million DISREP loan from the World Bank also 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; achieve financial sustainability in the power sector, and enhance transparency and accountability,” the BPE said. 

The bureau said it obtained approval from the federal executive council (FEC) on August 3, 2022.

According to the statement, there has been execution of the loan’s financing agreement between the ministry of finance, budget and national planning, and the World Bank; as well as the adoption of the programme operations manual (POM) by BPE and Transmission Company of Nigeria (TCN).

The BPE said it has also obtained legal opinion from the attorney-general of the federation, and executed the subsidiary loan agreement. 

Effective declaration of the DISREP programme, the agency said, was carried out on January 31, 2023, adding that the DISREP technical committee was inaugurated on May 6, 2024, 

The BPE added that the inclusion of the loan in the federal government borrowing plan was “approved by the senate committee on May 16, 2024”.

The bureau said it has also obtained approval from the NERC and the National Council on Privatisation (NCP) for a structured repayment hierarchy. 

“This structure prioritizes payments as follows: Statutory Payments (Taxes); Repayment of CBN market loans; Market obligations; Repayment of DISREP loan; DisCos’ net revenue,” the bureau said. 

The structured repayment plan, BPE said, aims to ameliorate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.