• Friday, June 21, 2024
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CBN tasks commercial banks to take full responsibility of remittance on behalf of DisCos

DisCos

The Central Bank of Nigeria (CBN) has asked all Deposit Money Banks (DMB), also called commercial banks, to take full responsibility of collections and remittance on behalf of Electricity Distribution Company (Discos), a move expected to solve the liquidity challenge facing Nigeria’s electricity sector.

According to a circular signed by CBN’s director of banking supervision, Bello Hassan, commercial banks providing banks guarantees to Nigeria Bulk Electricity Trading (NBET) plc and Transmission Company of Nigeria (TCN) would take full responsibility of collections and remittances on behalf of Discos.

“No DMB is permitted to open or continue to maintain a collection of account for a Disco without the express no-objection of the DMB that guaranteed its exposure to NBET or TCN,” CBN said in the circular addressed to all banks dated August 24.

CBN noted that all energy and non-energy collections of Discos, whether cash or cashless, shall only be performed by commercial banks.

Also, the CBN explained that commercial banks are expected to work with relevant stakeholders to ensure all energy collection are categorised as Feeder Collection Account (FCA) in the sole name of the Discos.

“DMBs shall ensure that bulk purchasers and resellers of energy maintain a dedicated and segregated account per Discos for customer energy collection,” CBN said.

The CBN stated that all supervised entities acting as financing Agents for the purchase of energy shall only charge fees in line with CBN regulations.

Since the privatisation of the distribution and generation segments of the nation’s power industry some seven years ago, the industry has been enmeshed in crisis of insufficient revenues, weak cash flows, high leverage and low liquidity due largely to unreflective tariffs and low generating capacity.

While electricity demand was estimated at 25,790 megawatts (MW), the highest power a generation has stagnated at about 5,375MW. Unreflective tariffs also impede the ability of the Industry operators to generate sufficient cash flows and heighten the liquidity challenges in Nigeria Electric Power Industry’s (NEPI).