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Heavy debt burden threatens Nigerians yearning for stable electricity

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By Odunewu Olusegun

Nigerians yearning for a stable electricity in the country are being threatened by the heavy debt burden of the eleven Electricity Distribution Companies in the country to banks which is threatening their operations, National Daily has gathered.

findings show that the power sector owes banks about N819.97 billion as of last year. The National Bureau of Statistics (NBS) had, in 2020, put non-performing loans (NPL) in the power sector at N33.22 billion out of N1.23 trillion NPLs recorded by banks.

Recently the Asset Management Corporation of Nigeria (AMCON) took over the assets of Ibadan Electricity Distribution Company (IBEDC) over default in loan payment.

READ ALSOIt’s illegal for DisCos to disconnect customers’ light without prior notice- NERC

The development comes just as the Abuja Electricity Distribution Company (AEDC), which has already been taken over by the debt crisis, took another turn with the sacking of most key management staff.

RECALL that the Goodluck Jonathan government had in 2013 privatized the sector for $2.5 billion, which saw the distribution and generation segment divided into 17 companies – six GenCos and 11 DisCos.

Former Managing Director of Nigerian Bulk Electricity Trading Company (NBET), Rumundaka Wonodi, said the capital structure of the DisCos is not sustainable.

According to him, a situation where investors used debt to purchase the shares of the company and became reluctant to sell down their shares to attract new equity remains a challenge.

“Worse still, many of the DisCos have failed to invest to raise service level and revenues, failed to run prudent operations, the case of Abuja DisCo is a clear case where the management was seriously bloated. We can only hope that these two cases will make others sit up,” he said.

READ ALSOGroup sues Ikeja, Eko DisCos over failure to cap estimated billing of customers

Top management in one of the DisCos, who pleaded not to be mentioned because he has no authority to speak to the press, stated that the financial crisis in the power sector may make fresh investment elusive, adding that most international firms have no interest in investing in the sector other than to look for contracts.

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He pointed out that the DisCos are only players in the sector and could not function very well because of other factors like the transmission bottlenecks and prevailing economic issues that are beyond the DisCos.

The former President and Chairman of Council of Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, noted that the loans from the power sector threaten most commercial banks in the country, stressing that borrowing in dollar for a transaction domiciled in another currency remained a bad decision.

“Banks were made to lend to the DisCos. It is bad credit practice to borrow in one currency and the project is generating cash flow in another currency. There was a currency mismatch. The movement in currency rate has always been against the Naira,” Ajibola said.

A former Managing Director of one of the DisCos, who pleaded not to be mentioned, said if the prevailing situation is not addressed, it could lead to the collapse of the distribution companies.

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  1. Pingback: FG To Partner With Investors To Improve Power Supply, Says Minister | Bounce Nation

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