The Central Bank of Nigeria (CBN) will not shift grounds on its decision to escrow the bank accounts of power distribution companies.
In a meeting with the vice president Professor Yemi Osinbajo and senior government officials, on Friday afternoon, the DisCos sought to compel the government to delay the order but were unsuccessful.
Two weeks ago, the apex bank directed Deposit Money Banks (DMB) to take full responsibility for collections and market remittance on behalf of Discos if they are providing guarantees to NBET and TCN, a move expected to solve the liquidity challenge facing Nigeria’s electricity sector.
“No DMB is permitted to open or continue to maintain a collection of account for a Discos without the express no-objection of the DMB that guaranteed its exposure to NBET or TCN,” the CBN said in the circular addressed to all banks dated August 24.
The implication of escrowing DisCos account is that they are compelled to meet their monthly obligation to the sector including the remittance of 63% of their collections.
It would seem the DisCos would rather continue the current practice whereby they remit whatever they choose monthly.
A senior government official told BusinessDay that the DisCos were over playing their card given they are responsible for a meagre 4000MW in a nation where generators account for more that 42,000MW.
BusinessDay learnt that the CBN which has frequently supported the power sector with generous financial offers may now have reached it limit and is no longer willing to tolerate the perceived excesses of the DisCos.
One option on the table could be to allow the banks recall the huge debt owed by the DisCos and their parent companies which could top N1trn.
It will be akin to the bank take over of Etisalat Nigeria in 2017 after it failed to reach an agreement with local banks to renegotiate the terms of a $1.2 billion loan obtained in 2013.
A similar fate could befall the DisCos if they cannot improve remittances to the market.
Remittances to the market has been around 60 percent.
A reconciliation of the monthly invoices and payments between the Nigerian Bulk Electricity Trader (NBET) and operators show that the eleven DisCos owe a combined sum of N622.4billion and interest accrued on this debt has risen to N308.2billion bringing their cumulative debt to N930.6billion.
To improve liquidity in the power sector, the sector regulator, the Nigerian Electricity Regulatory Commission (NERC), has approved a Service-reflective tariff plan which effects on average at least 50 percent increase on electricity tariffs for customers who get more hours of power supply between 12 and 20 hours daily.
“This will only solve a part of the problem but not all,” said Ayodele Oni, energy lawyer and partner at Bloomfield Law Firm.
Oni said that while the CBN’s objective is reduce market indiscipline but it does not solve the problem of collections and technical losses as these are important to determine how much is even available.
Three years ago, NERC had threatened to escrow DisCos account when remittance fell to 40 percent of market invoices. DisCos opposed the plan, saying it was tantamount to an attempt at nationalization or expropriation their business.
The Federal Government jettisoned the move then and instead injected N701billion as payment assurance for invoices of power generation companies and this tided the sector for a while.
But the liquidity challenges in the sector has worsened. Therefore analysts expect that the new tariff plan as well as the new financing expected for metering will help inject fresh capital into the beleaguered power sector.
