From David Onuoja, Abuja
The Distribution Company of Nigeria (DisCos), has been told to increase their capitalization to the sum of $500m if the power sector in Nigeria is to attain the required goal.
The Managing Director, Azura power West Africa, Mr Edu Okeke, Stated this while addressing the Power Sector Correspondent Association of Nigeria (PCAN), during its 4th annual workshop with the theme: Nigeria Power Sector: Ending the Talk, Moving to Action,” held at the Nicon Luxury Hotel, Abuja.
He said until and unless the needed thing is done, the issue of epileptic power supply in Nigeria will remained a mirage.
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The MD of Azura power said, “to enable any meaningful progress, DISCOs must be adequately capitalized. Unfortunately, most DISCOs have negative equity, leaving them with little to no financial stake.
“This situation must change. Ideally, no DisCo should operate without at least USD 250m in shareholder funds. Just as the Central Bank of Nigeria has raised capital requirements for banks to ensure their stability and capacity to serve, the Nigerian Electricity Regulatory Commission (NERC), should mandate similar capitalization standards for DISCOs.
According to him, “we must face the current reality: the Government is struggling to uphold these guarantees and is unlikely to offer more. So, we find ourselves at a crossroads. The question is, how can we ensure investment sustainability in this sector without relying on government guarantees?
“For any investment in the power sector to be viable, investors must be assured of Cost recovery. There are only two ways to achieve this: either the Government pays or consumers do. I commend the Government’s recent decision to transfer costs to consumers, starting with Band A. Ultimately, consumers will bear a fair share of the cost of the power they consume.
“However, this equation has a critical weak link —the Distribution Companies (DISCOs), who directly interface with consumers. As things stand, even with tariff adjustments, many DISCOs struggle to pay their total bills to the entire value chain. This is largely due to their lack of capacity to make the necessary investments to recover costs effectively.
“Many DISCOs also carry a heavy burden of debt, accumulated over time through a mix of operational challenges and systemic issues. To truly address this problem, the Government needs to come clean and take a decisive step.
“My recommendation is a two-pronged approach: to consider removing these debts from the DISCOs’ books and mandating them to increase their capital by at least USD 500 million each.
“This will require existing shareholders to dilute their holdings to attract new investors with real capital to invest in infrastructure not just on paper, but in transformers, cables, and equipment to serve customers reliably.
“In order to move from Talk to Action, Let us move forward with courage, commitment, and a shared vision to power Nigeria into a brighter, more prosperous future.
“Today is not one to recount the issues we know too well but to urge action. The steps I have outlined may be challenging, but they are achievable and necessary if we are to transform our power sector from a burden into an engine of economic growth.
“Stable, reliable power is a prerequisite for any meaningful development in Nigeria, and it is within our reach”, Edu averred.
Earlier, the Power Correspondents Association of Nigeria (PCAN) Chairman, Obas Esiedesa, said PCAN remains the only journalism association dedicated solely to journalists covering the power sector in Nigeria.
His word: “as journalists covering the power sector, we are concerned that the sector has seen more discussions than actual progress. Despite the constant dialogue, each step forward often seems to bring about setbacks.
“We acknowledge the significant efforts underway in the sector, including the proactive steps by various states through the Electricity Act, the planned unbundling of the Transmission Company of Nigeria, the move towards a bilateral trading market, and the introduction of new power plants”, he said.
