DisCos face bleak future over N930bn debt in unpaid invoices owed NBET

A grim picture of the finances of Nigeria’s electricity distribution companies (DisCos) is emerging after a reconciliation of the invoices and payments between them and the Nigerian Bulk Electricity Trader (NBET) showed that the 11 DisCos owe a combined sum of N622.4 billion plus N308.2 billion in interest charged.
It takes the cumulative debt of the DisCos to a staggering N930.6 billion, according to an industry document seen by BusinessDay.

The reconciled position shows that Federal Government’s ministries, departments and agencies (MDAs), on the other hand, owe the DisCos a total sum of N45.8 billion.

Both the NBET and the DisCos have held meetings and agreed on the outstanding market invoice as well as the debt owed the DisCos by government MDAs, BusinessDay learnt.

However, the DisCos are disputing the size of the N308.2 billion interest on their debt to the market on the basis that they are not allowed to charge interest on their own debtors.

“We are not allowed to charge customers who owe us interest, so it is not fair that we are charged interest on our debts,” said a director in one of the DisCos who asked not to be named.

According to the data, Abuja DisCo emerged the most indebted, to the sum of N173.5 billion including interest, while it is owed over N7 billion by various government MDAs under its franchise area.

Enugu DisCo is indebted to the tune of N113 billion including interest but has outstanding collections from the MDAs to the tune of N2.5 billion.

Kaduna DisCo followed with a debt of N107 billion including interest to the market while it is expecting to collect N8.7 billion debt from various government MDAs under its network.

Benin DisCo, according to the document, owes NBET N72.2 billion including interest charged on the debt but it is owed N1.7 billion by government MDAs it serves.

Ikeja DisCo, the report said, is indebted to the market to the tune of N97.6 billion including interest charged on the debt but is being owed N1.6 billion by various MDAs under its jurisdiction.

Ibadan DisCo is indebted to the tune of N85.3 billon including interest calculations and it is in turn being owed N2.6 billion by government MDAs.

Jos DisCo, similarly, has obligations to the market to the tune of N35.9 billion including interest charged and in turn, it is being owed N7.2 billion by the various government MDAs under its franchise area.

In the case of Kano DisCo, its debt to the market including interest on the debt is N76.1 billion but it has unpaid invoices from the government MDAs to the tune of N1.3 billion.

Port Harcourt DisCo has debts of over N100.4 billion including interest on the debt but the government MDAs it services owe it N2.5 billion.

Yola DisCo, now in the control of the government, has the least debt of N16.8 billion and the MDAs owe it N2.4 billion.

“These figures show clearly that the DisCos are in a complete mess financially and they cannot now be counted on to make the required investment to improve power supply to Nigerians,” a financial analyst following the matter told BusinessDay. “Add to this the growing demand that governance too must be addressed at this key point of the value chain.”

Following a directive from the Nigeria Electricity Regulatory Commission (NERC) in December 2019 requesting that the DisCos and NBET agree on a common figure for all invoices and payments for the period February 2015 to December 2018, the players began harmonising the financial position of the sector.

The reconciliation was necessary to understand the true position of the accounts after the Federal Government approved N600 billion bailout to the sector under the NBET payment assurance facility expansion loan.

In March, President Muhammadu Buhari took it a step further and approved the composition of a power sector reform coordination group under the leadership of Vice President Yemi Osinbajo that will extend the reconciliation to the present date.

In a statement, Nasir el-Rufai, governor of Kaduna State, said the new working group would incorporate the ongoing efforts of his committee to ensure all power sector initiatives are on the same page. El-Rufai was appointed as the head of the ad-hoc committee reviewing the ownership of the electricity distribution companies (DisCos) in November.

A draft report of the committee seen by BusinessDay recommended that operators should respect contract terms, GenCos should be encouraged to invest in DisCos to aid their recapitalisation, and operators should honour governance rules.

To resolve the illiquidity in the Nigerian electricity market, the committee recommended that market rules should apply and players act based on Willing-Buyer-Willing-Seller (WB/WS) arrangements.

The report proposed the recapitalisation of the DisCos by encouraging GenCos to invest in them so that they can bring in their capital and management expertise.