Unserious DisCo Owners Should Sell

yemi-osinbajo-and-tony-elumelu

The Vice President Prof. Yemi Osinbajo spoke the minds of most Nigerians recently when he told owners of the privatized electricity distribution companies [Discos] to reinvest in them and run them efficiently or else they should sell them to those who can. Osinbajo was responding to the Chairman of Heirs Holdings Limited Mr. Tony Elumelu, who had called for the recapitalization of all the DisCos and also urged government to increase its investment in them.

Elumelu made the call at the 23rd Nigerian Economic Summit which was jointly organized by Nigeria Economic Summit Group [NESG] and the Federal Ministry of Budget and National Planning. Elumelu argued that recapitalization would enable the DisCos to have enough resources to invest more in electricity distribution chain for Nigerians to get better value. He said that fixing the power problem alone would fix most of Nigeria’s teething economic challenges.

However, Osinbajo said the federal government doesn’t have additional money to invest in the DisCos. He said the owners should look for ways to attract more capital to their businesses or sell out to those with the financial capability. It would be recalled that the federal government has 40 percent equity in each of the 11 DisCos while the core investors have 60 percent equity each.

Also speaking at the end of the Summit, Minister of State for Budget and National Planning Mrs. Zainab Ahmed said “the power sector has been privatised and every Nigerian knows that the privatisation has not worked well. Things we sought to achieve in the power sector have not yet happened and we have now come to the point where investors in the power sector must come together and decide to cede some of their holdings to enable new investors with expertise to come in, to enable us grow the power sector at the pace we want.”

The minister said making the power sector efficient would involve negotiations between existing owners, government and other stake holders. She said no new investor would be interested to come in with the level of tariff obtainable now. She hinted that discussions must have to be held because the level of tariff obtainable now is not realistic. “It would therefore be a subject of negotiations,” she said, “between government, the existing investors, the new investors as well as consumers.”

The most profitable gain of privatization is not the money that accrued to government from the sale of the electricity corporation but the level of improved power supply enjoyed by Nigerians after the sale. This has unfortunately not materialized as posited by Mrs. Zainab Ahmed. Four years after its privatisation, the sector is still grappling with teething challenges. These include 50 percent of electricity consumers that are yet unmetered, poorly-maintained infrastructure, inability to procure and utilize part of the energy generated by Gencos as well as perpetual pressure from Discos to increase tariff. These challenges simply suggest that wrong investors bought the Discos.

While we do not encourage the reversal of the power sector privatisation, we advise the federal government to go beyond calling existing owners of Discos to roundtable discussions by insisting on incompetent investors to sell off their shares to those who can fulfill the age-long dream of Nigerians for constant power supply. The sector has better prospect of becoming viable and sustainable only when it falls into the hands of technically and financially competent investors that have the capacity to tackle the sector’s current critical challenges including metering of all customers and the utilization of all the megawatts of electricity generated by Gencos.

Power is crucial to any modern economy. Government, therefore, has a duty to ensure that the privatization of the sector works in order to actualize all the envisaged socio-economic benefits. Stable electricity supply will propel micro-economic activities, especially among Small and Medium Enterprises (SMEs). The more the SMEs become active players in the economy, the higher the prospect of having the country’s poverty and unemployment rates reduced significantly.

Source: IWIN

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