Sack the DisCos

Nigeria’s cash-strapped power distribution companies (DisCos) might have taken their billing scam a few notches above the limits of consumers’ tolerance.  They have finally dragged the senate into the fray over scandalous electricity bills.  Last week the issue of fraudulent estimated bills featured in the plenary session of the senate.
The man at the centre of the storm is someone whose name is the synonym of controversy.  Dino Melaye enjoys kicking up storms.  However, last week’s storm was about something that has deterred Nigeria’s economic growth for over 50 years now.
Melaye addressed the senate on the cooked-up bills slammed on him by Abuja Electric Distribution Company (AEDC).

Trouble started when AEDC reportedly withdrew the pre-paid meter in the senator’s residence and replaced it with a new one.  The new one was inexplicably withdrawn by the DisCo.  This time it was not replaced.  The development torched off a spate of unjustifiable estimated bills that the senator eventually complained to the senate.
Melaye wondered what the DisCos were doing to ordinary Nigerians if they could slam such bills on elite who they knew could invoke the long arm of the law against them.
The day after Melaye’s complaint, Ben Murray-Bruce, a respected senator, re-echoed the evils of the DisCos on the floor of the senate.

Murray-Bruce is the chairman of the Senate Committee on Privatisation.  Melaye’s complaint had opened a can of worms in a sphere of the economy that Murray-Bruce supervises.  The senator’s rage against the DisCos was understandable.  Everyone knows that epileptic power supply contributed immensely in slipping the economy into recession.
Now that the guns of Niger Delta have been momentarily silenced and oil price and production are inching up, the only thing that could keep the economy in recession beyond the third quarter of 2017 is poor power supply.

The problem is that no one knows how to tackle the debt contagion in the power sector.  Murray-Bruce was so enraged by the liquidity crisis of the Discos that he declared them technically insolvent.  He warned consumers that the DisCos were so broke that they could not even fund the purchase of pre-paid meters to end the massive fraud in estimated billing.
The truth is that even if they had all the money in the world, the DisCos would not voluntarily supply pre-paid meters to consumers because it would effectively block their dubious source of income.

Unlike Babatunde Fashola, the beleaguered minister of power, works and housing, who would only fascinate the DisCos with impotent rage, Murray-Bruce appears to have a solution to Nigeria’s intractable power problem.  He called on the senate to reverse the scandalous privatization process that handed the DisCos the distribution arm of the nation’s power sector.

The privatization process was contrived to enrich cash-strapped, inexperienced cronies of those in power.  It was designed to use the DisCos as conduit for siphoning public funds into a bottomless pit.  Now that their mentors have been ousted, the DisCos are in very precarious financial situation and their stranglehold on the economy through epileptic power supply can only exert catastrophic downward pressure on productivity.

The buck-passing in the power sector is a senseless diversionary tactic.  The GenCos claim that the DisCos were at the centre of the darkness in the land because they lack the equipment to distribute the power wheeled into the national grid.  The DisCos contend that the GenCos are blaming them for problems created by the Transmission Company of Nigeria (TCN). They argue that TCN cannot transmit all the power generated by the GenCos to them.
The GenCos themselves agree that TCN is a weak link in the power supply chain.  However, everyone knows that the DisCos are at the centre of the debt contagion in the industry.  Their books are deep in the red.

They can only fund 45 per cent of their monthly budget.  Last year, they only managed to pay for 27 per cent of the power they distributed. Banks no longer grant them credits because they have all defaulted on previous loans.  The federal government itself is too broke to bail out the cash-strapped DisCos.
Nigeria is therefore in a quagmire. The Central Bank of Nigeria (CBN) has been pumping scarce forex into the foreign exchange market with the hope of stabilising the market and persuading foreign investors to bring in foreign direct and portfolio investments.
With the power sector plunging Nigeria into darkness, the CBN is being led into battle in the foreign exchange market with its hands tied to the back.  Foreign direct investors know how expensive it is to generate power in Nigeria.

Even with inflation receding in the last three months, high cost of power generation still exerts enormous pressure on the cost of production, eventually pricing products out of the reach of majority of the consumers, especially those below the poverty line.  That is not the market foreign investors are targeting in a world where power supply is taken for granted in most of the emerging markets.
The senate should compel the federal government to sack the DisCos and open a fresh bid that would bring in experienced firms with the liquidity to reverse the rot in the distribution arm of the power sector.

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