• Saturday, March 02, 2024
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MOFI takes over stakes in 11 Discos, initiates reforms

Four knotty issues around MOFI’s takeover of FG’s stakes in DisCo

Ministry of Finance Incorporated (MOFI) has begun restructuring and initiating reforms as it takes over from the Bureau of Public Enterprises (BPE), the Federal Government’s equity holdings in the 11 successor electricity distribution companies (DISCos) of the defunct Power Holding Company of Nigeria

MOFI said the restructuring is to maximize value derived from the electricity assets and deliver full value to the country.

The federal government agency actualizes this by formally terminating the power of attorney granted the BPE to hold on its behalf, the Federal Government’s equity holdings in the DISCos, and directing their reversion to MOFI.

Recently, the Honourable Minister of Finance and Coordinating Minister of the Economy, Wale Edun, issued an Order to the Board of Directors of MOFI to terminate the Power of Attorney (POA) granted by MOFI to the Bureau of Public Enterprises (BPE) in 2012. The Directors of MOFI were, also by virtue of the same order, to assume ownership, control and management of all outstanding Federal Government of Nigeria (FGN) equity in all existing electricity successor companies.

MOFI’s Chief Executive Officer, Takang Armstrong, highlighted the agency’s commitment to adopting a new, value-driven strategic direction in managing Federal Government assets. As part of this initiative, MOFI is set to develop a National Assets Register, profiling all national assets and investments for effective management.

The MOFI stated that it would develop and implement policies and regulations that ensure the creation and management of assets from debt-related transactions.

It was further determined that in line with global best practice, MOFI would take on an expanded and more active role, not to directly take over and run the corporate entities created around these FG assets but rather to work with its co-promoters and shareholders to develop and implement corporate policies and practices that ensure that these assets are operated for maximum value.

“This revitalised strategy is underpinned by a three-point agenda of establishing and confirming state ownership, professionalising state ownership and strategic resource mobilisation and investment. The process of reform and restructuring leads to the consolidation and assumption of the ownership rights of MOFI’s shareholdings across various asset classes” the statement read.

“This strengthens the FG’s shareholder rights and ensures that entities in which MOFI holds equity stakes fulfil their socio-economic responsibilities and generate substantial financial returns for
the FGN. MOFI’s resumption of its rights of management of the FG’s 40% shareholding in the eleven electricity distribution companies and the various equity stakes in related energy sector companies is an essential element of this consolidation. It will drive operating efficiency, best corporate governance practices and ultimately maximise the value derived from these electricity assets, in alignment with President Bola Ahmed Tinubu’s economic growth agenda”, the statement added.

MOFI is a statutory corporation-sole established by the MOFI Act, 1959 (“the Act”). The legislative intent of the MOFI Act was and remains that the corporation is constituted as the holder and manager of all assets acquired by way of debt or equity capital from the funds of the FGN.

These assets include the investments in the defunct National Electric Power Authority; which, under the repealed Electric Power Sector Reform Act, 2005 (EPSRA), evolved into Power Holding Company of Nigeria Plc and subsequently unbundled into the various electricity “successor companies”, including the eleven distribution companies (Discos).

Acting under the Public Enterprises (Privatisation and Commercialisation Act) (“the NCP Act”), 1999, the National Council on Privatisation (NCP), a body in which the Minister of Finance is a statutory member and Vice-Chairman, decided in 2011 that the privatisation of the electricity successor companies would be by sale of shares. At the time, Nigerian company law did not provide for a single shareholder company hence it was legally impossible for MOFI to be the sole holder of the shareholding of the FGN.

This made it necessary that a second entity hold the shares in addition to MOFI. In addition, BPE, as the secretariat of the NCP, was the statutory entity tasked to provide support to MOFI in giving effect to the NCP’s decision. Thus, in 2012, MOFI issued a Power of Attorney to the Bureau of Public Enterprises (“BPE”) whereby BPE was empowered to carry out the actions necessary to fulfil the NCP’s directives and complete the various electricity privatisation (share sale) transactions. BPE had since then held shares in the Discos on behalf of MOFI.

This continued for over 10 years after the sales were completed in 2013, until the recent Order by the minister of Finance. In the past 24 months, and particularly since the amendment of the
MOFI Act by the Finance Act, 2023, has been reformed and restructured from a Unit in the Office of the Accountant-General to a full-fledged public sector (FGN) asset management corporation.

This arose from the recognition that FGN assets across practically all economic sectors nominally valued at very significant sums were largely moribund or grossly underutilized and poorly managed. Consequently, it was determined in 2021 by the then Minister of Finance, amongst other relevant decisions, that MOFI would adopt a new, value-driven strategic direction in aggregating and managing FGN