FG secures $500m World Bank loan for DisCos

FG secures $500m World Bank loan for DisCos

The federal government has secured $500million loan from the World Bank to improve electricity Distribution Companies (DisCo) performance.

She said, approved on February 4, 2021, by the World Bank Board of Directors, this funding supports the Nigerian Distribution Sector Recovery Program (DISREP) aimed at improving the financial and technical performance of the DisCos.

The Distribution Sector Recovery Program (DISREP), said the Head of Public Communications, is designed to enhance the financial and technical operations of the DisCos through capital investment and the financing of key components of their Performance Improvement Plans (PIPs), which have been approved by the Nigerian Electricity Regulatory Commission (NERC).

• Bulk procurement of customer/retail meters and meter data management systems.

• Implementation of a Data Aggregation Platform (DAP).

• Strengthening governance and transparency within the DisCos.

• Program Components

• The DISREP comprises two main components:

• Program for Results (PforR):

• Allocation: $345 million

• Purpose: Support the implementation of selected PIP components.

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• Implementation: Bureau of Public Enterprises (BPE)

• Investment Project Financing (IPF):

• Allocation: $155 million

The Purpose is to finance the procurement of meters, a Data Aggregation Platform, and Technical Assistance.

The statement added that 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

• Increasing transparency and accountability within the DisCos.

BPE further noted that the $500 million DISREP loan from the World Bank offers concessional financing with more favourable terms than commercial bank loans.

This, she said, will enable the DisCos to:  Invest in critical distribution infrastructure, improve ATC&C losses, and increase power supply reliability.

It will also achieve financial sustainability in the power sector, and enhance transparency and accountability.

BPE said: “Significant progress has been made in the preparation of the DISREP Program, with several key milestones achieved, and approval by the Federal Executive Council (FEC) on August 3, 2022. execution of the Financing Agreement by the Federal Ministry of Finance, Budget and National Planning, and the World Bank, adoption of the Program Operations Manual (POM) by BPE and TCN, obtaining Legal Opinion from the Attorney-General of the Federation, Execution of the

Subsidiary Loan Agreement, effective declaration of the DISREP Program on

January 31, 2023, inauguration of the DISREP Technical Committee on May 6,

2024, inclusion in the Federal Government Borrowing Plan, approved by the Senate Committee on May 16, 2024.”

The spokesperson said to ensure repayment assurance, the BPE sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatisation (NCP) for a structured repayment hierarchy.

It added that this structure prioritizes payments as follows: Statutory Payments (Taxes); repayment of CBN market loans; Market obligations, repayment of DISREP loan; and DisCos’ net revenue.

BPE said this structured repayment plan aims to mitigate risks associated with repayment uncertainty and defaults, with regulatory sanctions imposed for any defaults.

FG secures $500m World Bank loan for DisCos