In a significant move, the Federal Government of Nigeria is gearing up to sell Kaduna Electricity Distribution Plc (Kaduna Electric), the nation’s sixth-largest power distribution utility, due to its escalating debt issues. This decision comes less than two years after the company’s takeover by lenders failed to rejuvenate its financial health and profitability.
According to a Reuters report, a recent notice by the Nigerian Electricity Regulatory Commission (NERC), Kaduna Electric is burdened with a staggering debt of N110 billion ($130 million), owed to various entities, including the Nigerian Bulk Electricity Trader and power generation firms. Despite efforts by the African Export-Import Bank (Afreximbank) and local lender Fidelity Bank, who took over the company in July 2022, to revive its financial performance, Kaduna Electric continues to face significant challenges.
The electricity distribution company, which operates in four northern states and is one of the 18 successor companies formed after the privatization of the defunct Power Holding Company of Nigeria in 2013, has been labeled a ‘failing licensee’ by the regulator. In response, NERC is invoking a recently passed law to dissolve the company’s board.
Nigeria’s power sector, despite being Africa’s largest economy, has been grappling with various challenges, with the 11 power distribution companies in the country finding it increasingly difficult to stay profitable due to capital deficiencies and the burden of sub-economic tariffs imposed by NERC.
The Nigerian government, which currently holds a 40% stake in Kaduna Electric through the Bureau of Public Enterprises (BPE), had previously announced plans to sell off the remaining government stake in electricity distribution companies (discos) and four other assets in 2024. This strategic move aligns with the government’s broader agenda to generate revenue, reduce fiscal burdens, and attract increased investor participation in the economy.
The government’s privatization efforts in 2024 aim to generate N298.4 billion in revenue, addressing public debts, stimulating macroeconomic growth, and optimizing investor engagement in the Nigerian economy, as highlighted by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun.
Source: Nairametrics
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