House of Representatives on Wednesday kicked against ongoing plans by the Federal Government to secure N309 billion bond to finance the outrageous shortfall in the Nigerian electricity market.
To this end, the House called on Federal Ministry of Power, Works and Housing and the Nigeria Electricity Regulatory Commission (NERC) to immediately halt the move to raise the bond.
Federal Ministry of Power, Works and Housing had initiated plan to raise a Federal Government-secured bond of N309 billion using the Nigeria Bulk Electricity Trading Company (NBET), allegedly to cover the market shortfall made up of N187 billion accrued in 2015 and N122 billion projected shortfall for 2016, according to the lawmakers.
While expressing concern over the justification for the funding, the House mandated NERC to devise a monitoring mechanism to measure and enforce full monthly remittance by Discos, recoup all misappropriated funds that resulted in the accumulated market shortfalls and apply sanctions for any default whatsoever, including the threat to withdraw the licences of erring Discos.
The resolution was passed following the adoption of the motion sponsored by Edward Pwajok (PDP-Plateau), who frowned at the market shortfall otherwise described a “invoice amount of electricity transmitted to the distribution companies in any given month less the amount remitted by the distribution companies to pay the market participants for electricity supplied.
“The House is worried that this planned massive borrowing is 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.
“Also 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.”
The lawmaker lamented that the Discos, which collect revenues, fail to remit in full to other market participants, without any measures put in place by the NERC to block the leakages and there are no sanctions/penalties for defaulters.
While calling for the intervention of the House, the lawmaker observed that “despite there being no noticeable improvement in the electricity sector, either in the area of generation, transmission or distribution, tariffs have been increased twice since 2013.
“The House is also 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 any tangible assets without any monitoring by NERC.
“The House 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 like hood of another tariff increase to accommodate the cost of the bond, (though they already enjoy cost-reflective tariff in the MYTO 2015),” Pwajok stated.
He maintained that the negative consequences of the N309 billion bond which would amount to not only spoon-feeding the operators in spite of their efficiency, will be at great costs to Nigerians as the risk of default, cause the crystallization of the Federal Government Sovereign Guarantee and lead to energy crisis in the nation.
Sequel to the adoption of the motion, the House mandated the Committees on Power, Privatization and Commercialisation, Aids Loan Debts Management to investigate the matter and report back to the House within six weeks.
