The Federal Government of Nigeria has successfully secured a $500 million loan from the World Bank to enhance the country’s electricity distribution sector, according to an announcement by the Bureau of Public Enterprises (BPE) on Thursday. This loan aims to address the myriad challenges faced by Nigeria’s distribution companies (Discos).
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“In a strategic move to address the identified gaps in the electricity distribution companies, the Federal Government of Nigeria has secured a $500m loan from the World Bank,” stated Amina Othman, Head of Public Communication at the BPE, in a statement issued in Abuja.
Approved on February 4, 2021, by the World Bank board of directors, the funding is part of the Nigerian Distribution Sector Recovery Programme (DISREP). The DISREP is designed to improve the financial and technical performance of the Discos by funding their Performance Improvement Plans (PIPs) approved by the Nigerian Electricity Regulatory Commission.
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Key areas targeted for improvement include the bulk procurement of customer and retail meters, implementation of meter data management systems, establishment of a Data Aggregation Platform, and strengthening governance and transparency within the Discos.
The DISREP consists of two main components:
- Program for Results: With an allocation of $345 million, this component supports the implementation of selected PIP components. The Bureau of Public Enterprises is tasked with its implementation.
- Investment Project Financing: Allocated $155 million, this component finances the procurement of meters, development of a data aggregation platform, and provision of technical assistance.
The Investment Project Financing component is expected to significantly benefit the Nigerian Electricity Supply Industry by closing the metering gap, reducing Aggregate Technical, Collection, and Commercial (ATC&C) losses, and improving remittances and liquidity for the Discos. Additional benefits include enhanced reliability of power supply and increased transparency and accountability within the Discos.
The $500 million loan offers concessional financing with more favorable terms than commercial bank loans, enabling the Discos to invest in critical distribution infrastructure, improve ATC&C losses, increase power supply reliability, achieve financial sustainability in the power sector, and enhance transparency and accountability.
Significant progress has been made in the preparation of the DISREP programme, with several key milestones achieved and approved by the Federal Executive Council on August 3, 2022. These include the execution of the Financing Agreement by the Federal Ministry of Finance, Budget and National Planning, and the World Bank, as well as the adoption of the Programme Operations Manual by the BPE and Transmission Company of Nigeria.
The government has also obtained a legal opinion from the Attorney-General of the Federation and executed the Subsidiary Loan Agreement. The effective declaration of the DISREP Programme occurred on January 31, 2023, followed by the inauguration of the DISREP Technical Committee 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 Bureau of Public Enterprises secured 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 Central Bank of Nigeria market loans, market obligations, repayment of the DISREP loan, and Discos’ net revenue.
Power distribution companies in Nigeria have been criticized as the weakest link in the country’s power value chain due to numerous lapses, including the lack of metering for approximately eight million out of 13 million registered electricity consumers and complaints of poor power supply.
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