The Nigerian government has secured a $500 million loan from the World Bank to address the challenges facing the country’s Electricity Distribution Companies (DisCos).
The loan is part of the Nigerian Distribution Sector Recovery Programme (DISREP), which aims to improve the financial and technical performance of the DisCos.
The DISREP program is designed to enhance the financial and technical operations of the DisCos through capital investment and the financing of key components of their Performance Improvement Plans (PIPs).
The program has two main components: the Program for Results, which has an allocation of $345 million, and the Investment Project Financing, which has an allocation of $155 million.
The loan 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, and enhancing the reliability of power supply.
The loan also offers concessional financing with more favorable terms than commercial bank loans, enabling the DisCos to invest in critical distribution infrastructure and achieve financial sustainability in the power sector.
The Bureau of Public Enterprises (BPE) has made significant progress in preparing the DISREP program, with several key milestones achieved and approved by the Federal Executive Council.
The program’s effective declaration was done on January 31, 2023, and the inauguration of the DISREP Technical Committee was on May 6, 2024. The inclusion in the Federal Government borrowing plan was approved by the Senate Committee on May 16, 2024.
To ensure repayment assurance, the BPE has obtained approval from the Nigerian Electricity Regulatory Commission and the National Council on Privatisation 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, and DisCos’ net revenue.
The DISREP loan is expected to address the challenges facing the DisCos, including the lack of meters for registered power users, poor power supply, and extortionate billing practices.
The loan is a significant step towards improving the power sector in Nigeria and enhancing the reliability of power supply to consumers.
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