Members of the Federal House of Representatives have asked the ministry of Power, Works and Housing and the Nigeria Electricity Regulatory Commission (NERC) to drop their plan of raising bonds to make up for the shortfall in electricity revenue.
The Ministries of Power, Works and Housing and the NERC had reportedly initiated moves to raise a Federal Government-secured bond of N309 billion using the Nigeria Bulk Electricity Trading Company (NBET) to make up for the market shortfall of N187 billion accrued in 2015 and N122 billion projected shortfall in revenue this year.
The lawmakers insisted that the approach to breaching the gap in revenue loss is not justifiable; instead, it urged the NERC to devise a proper monitoring mechanism to measure and enforce strict monthly remittance by electricity distribution companies (Discos), including meting out appropriate sanctions including to withdrawal of licences of erring Discos, and full recovery of all misappropriated funds that resulted in the accumulated market shortfalls.
During the deliberation of a motion sponsored by Edward Pwajok (PDP-Plateau state), the lawmakers expressed worry on the planned massive borrowing in spite of intervention by Central Bank of Nigeria (CBN) in March 2015 through the grant of a bailout to the tune of N213 billion through the Nigerian Electricity Sector Intervention (NESI) facility.
The members also said they were worried that in spite of that intervention, the shortfall, “instead of being wiped out, has continued to escalate at the rate of about N15 billion” per month (equivalent to N500 million daily) rising to a total-market shortfall of N400 billion as at December 31st 2015.
Their anger was specifically directed at the fact that despite no noticeable improvement in the electricity sector, either in the area of generation, transmission or distribution, and tariffs being increased twice between 2013 and 2016. “The House is disturbed that tariff computation was a factor of capital investment which was considered during the privatization exercise, but regrettably, there is no evidence that the Distribution and Generating Companies (DISCOS) and (GENCOS) invested in acquiring tangible assets without any monitoring by NERC.
“The House is further worried that the successor companies have failed or neglected to-produce audited financial statements to NERC and Bureau of Public Enterprises (BPE) for the last two years and have also not held Annual General meetings to disclose their performance to the shareholders.
“We are also aware that the successor companies are supposed to borrow funds secured by their respective balance sheets and revenue streams to run their operations, but the Ministry is curiously trying to ride on the Nigerian sovereign guarantee, whereas the companies are not only deriving returns on investments but there is the likelihood of another tariff increase to accommodate the cost of the bond, (though they already enjoy cost-reflective tariff in the MYTO 2015),” the lawmakers said in the adoption of the motion to stop the move.