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Increase Capital by $500m, Stakeholders Urge DISCOS

By Patience Chat Moses

As key players in Nigeria’s power sector converge at the  Nicon Luxury Hotel in Abuja to mark the 4th edition of the Power Correspondents Association of Nigeria (PCAN) annual workshop, power Distribution companies (Discos have been advised to increase Increase  Capital by at least  $500 million. 

This call was made by the Managing Director and Chief Executive Officer of Azura Independent Power plant, Mr Edu Okeke.

Okeke spoke while giving a keynote address as the guest speaker at PCAN’s Workshop with the theme ‘Nigeria Power Sector; Ending the Talk,Moving to Action”.

He noted that many DISCOS  carry a heavy burden of debt, accumulated over time through a mix of operational challenges and systemic issues. 

And that to truly address this problem, the Government needs to come clean and take a decisive step.

“My recommendation, he said is a two-pronged approach: to consider removing these debts from the DISCOS’ books and mandating them to increase their capital by at least USD 500 million each.

“Today, let us confront a truth that is as straightforward as it is critical: Nigeria needs stable power if we are to make any meaningful progress.

Without stable power, our industries are bound to the cost and inefficiency of diesel generators, which ultimately makes our locally-produced goods more expensive than imported alternatives.”

Okeke states that the imbalance in the sector discourages local production and contributes to a widening trade deficit, depreciating currency, and persistent inflation.

Stable power, he said, is not merely a convenience but the engine that drives our economy.

“We recognize and appreciate the various efforts by Western countries to assist us in this journey.

His words: ” Initiatives such as mini-grids have their place, providing much-needed energy for communities and smaller-scale needs such as powering small enterprises and charging devices.”

However, mini-grids, he added, cannot power our industries, nor can they drive the large-scale economic growth we seek, adding that the country needs a stable, reliable grid power supply.

The Path to Stable Grid Power

To achieve stability of the national grid, Okeke indicated that more investments must be made with investors being assured of their returns on investment.

Referring to the initial government policies were aimed at guaranteeing returns on investment for power sector investors, promising them security and an avenue to recoup their costs. 

This commitment, he said, led to the establishment of NBET as a government entity to facilitate these guarantees,s, which attracted companies like Azura Power West Africa to invest.

However, he noted that there is a need to face the current reality;  Governments struggle to uphold these guarantees and are unlikely to offer more.

“The question is, how can we ensure investment sustainability in this sector without relying on government guarantees?

He opined that for any investment in the power sector to be viable, investors must be assured of cost recovery and that there are only two ways to achieve this: either the Government pays or consumers do. 

“I commend the Government’s recent decision to transfer costs to consumers, starting with Band A.

“Ultimately, consumers will bear a fair share of the cost of the power they consume, he said.

However, this equation, he noted, has a critical weak link, which is the Distribution Companies (DISCOS), who directly interface with consumers.

According to him, as things stand, even with tariff adjustments, many DISCOS struggle to pay their total bills to the entire value chain which is largely due to their lack of capacity to make the necessary investments to recover costs effectively.

To enable meaningful progress in the sector, DISCOS, he said, must be adequately capitalized.

He lamented that most DISCOS have negative equity, leaving them with little to no financial stake, a situation that must be changed, as no DISCO is initially expected to operate without at least USD 250m in shareholder funds.

Just as the Central Bank of Nigeria has raised capital requirements for banks to ensure their stability and capacity to serve, the Nigerian Electricity Regulatory Commission (NERC) should mandate similar capitalization standards for DISCOS Okeke advised.

This, he said, will require existing shareholders to dilute their holdings to attract new investors with real capital to invest in infrastructure, not just on paper, but in transformers, cables, and equipment to serve customers reliably.

Giving his remarks on the theme of the workshop ‘Nigeria Power Sector: Moving from Talk to Action” he said that 

the workshop is not another platform to recount the issues we know too well but to urge action. 

“The steps I have outlined may be challenging, but they are achievable and necessary if we are to transform our power sector from a burden into an engine of economic growth he added.

“Stable, reliable power is a prerequisite for any meaningful development in Nigeria, and it is within our reach. 

“Let us move forward with courage, commitment, and a shared vision to power Nigeria into a brighter, more prosperous future, he concluded.

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