FG Secures $500m to Improve Electricity Access and Reliability

The World Bank lends $500 million to FG to help with electricity distribution

The federal government has reportedly obtained a $500 million World Bank loan to improve the nation's electricity distribution, according to the Bureau of Public Enterprises (BPE).

The World Bank loan was disclosed by the Bureau of Public Enterprise (BPE) on Thursday. Amina Othman, the organization's head of public relations, signed the announcement.

The World Bank authorized $500 million in February 2021 to help Nigeria enhance the performance of its energy distribution businesses (DisCos).

On May 15, the Senate authorized the loan in response to a request from President Bola Tinubu to fund the federal government's mass metering initiative.

The BPE provided updates, stating that the loan was obtained to lessen the difficulties experienced by DisCos across the nation under the bank's distribution sector recovery program (DISREP).

BPE said: “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.

“Approved on February 4, 2021, by the World Bank board of directors, this funding supports the Nigerian Distribution Sector Recovery Programme aimed at improving the financial and technical performance of the Discos.

“The DISREP aims to improve the financial and technical operations of DisCos through capital investment and financing of approved performance improvement plans, approved by the Nigerian Electricity Regulatory Commission (NERC).”

The bureau stated that implementing a data aggregation platform (DAP), purchasing retail and customer meters in bulk, and bolstering transparency and governance within the DisCos are the main areas of improvement.

According to BPE, the first component is the outcomes program, which has a $345 million budget and $155 million set up for financing investment projects (IPF).

“The $345 million has been allocated to support the implementation of selected PIP components; implementation by Bureau of Public Enterprises (BPE) and $155 million allocated for Investment Project Financing (IPF) for the purpose of financing the procurement of meters, a Data Aggregation Platform, and Technical Assistance,” the statement further reads.

“The DISREP loan, particularly the Investment Project Financing (IPF) component, 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; Enhancing the reliability of power supply, and increasing transparency and accountability within the DisCos.”

In addition, the BPE stated that concessional funding with better terms than commercial bank loans is provided via the $500 million World Bank DISREP loan.

“This will enable 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,” the BPE said.

The Federal Executive Council (FEC) granted approval, according to the bureau, on August 3, 2022.

The statement states that the World Bank, the Ministry of Finance, Budget, and National Planning, and Transmission Company of Nigeria (TCN) have executed the loan financing agreement and that BPE and TCN have adopted the program operations manual (POM).

The BPE stated to have completed the subsidiary loan agreement and received legal counsel from the federation's attorney general.

The agency stated that the DISREP program was effectively declared on January 31, 2023, and that the DISREP technical committee was established on May 6, 2024.

The BPE further stated that the loan was “approved by the senate committee on May 16, 2024" to be included in the federal government borrowing plan.

The National Council on Privatization (NCP) and the NERC have also given their permission for a structured payback hierarchy, according to the agency.

“This structure prioritizes payments as follows: Statutory Payments (Taxes); Repayment of CBN market loans; Market obligations; Repayment of DISREP loan; DisCos' net revenue,” the bureau said.

BPE stated that the structured repayment plan, which imposes regulatory penalties for any defaults, attempts to reduce the risks related to repayment uncertainty and defaults.