The amount electricity consumers owed the Power Holding Company of Nigeria, PHCN as at the time of privatisation was N1.8 trillion.
The Nigerian Electricity Consumers' Protection Network has revealed that the 11 distribution companies that invested in the power sector in 2013 still have an outstanding N1.4 trillion to pay to the federal government as proceeds of privatisation, about 10 years after the exercise.
President of the group, Kunle Kola Olubiyi explained that the amount electricity consumers owed the Power Holding Company of Nigeria, PHCN as at the time of privatisation was N1.8 trillion. He said the electricity distribution companies paid only N400 billion to the government as proceeds of the privatisation.
He said, “I was a member of the Presidential Ad hoc Committee on the review of the electricity tariff in August 2020; I was a member of the National Investigative Panel on Power System collapse and stability.
“Money that electricity consumers owed PHCN at the time of privatisation was N1.8 trillion, remove the N400 billion from the amount; it means that there is still outstanding N1.4 trillion that DisCos need to pay to the federal government.
“They did not have their resources. Money that the federal government realised from the power sector privatisation, put together was N400 billion. And it went into payment of packages and allowances to former PHCN workers. So as a federation, nothing was put into the federation account as proceeds from the power privatisation.”
Olubiyi also aligned with the government regarding the new management that was allowed to take over most of the DisCos, saying the money borrowed by the companies was going into toxic debt and the only way out is for the new management to take over the DisCos.
“If you borrow money as a corporate entity and put your share at stake if you can't pay then you will lose your share. What the banks did using the instrumentality of the Nigerian Electricity Regulatory Commission (NERC) and Bureau for Public Enterprises (BPE) was to call the shares because that was what they used as collateral.
“However, although BPE and NERC are federal government agencies, they are not the same as the federal government or the Presidency.
“The loans they took, they had it in mind that it's going to be a bad debt. If other private organisations enter into bad debt with banks, you see Nigeria Deposit Insurance Corporation (NDIC) and Asset Management Company of Nigeria (AMCON) always step in to ensure that the banks did not collapse, that is what has happened to the former management of DisCos.
“The point I am making is that the governance structure was wrong and the regulatory echo system was weak, so if you borrow money from a bank, it is not free launch, it is depositors' money, and they had a payment plan which they couldn't pay," Olubiyi said.
He also explained that if there are no interventions in the bad debts the DisCos owed the banks, it may lead to systemic failure and lack of confidence in the banks.
“Before now, everybody in Nigeria had a lot of confidence in the Nigerian Stock Exchange, the safety valve where people love to keep their resources was buying of shares, and you are aware that some years past there was a lot of distortion in capital market, share manipulations and a lot of infractions that make it difficult to get back the public confidence on the market. Getting public confidence in the financial system stability is very important," he added.
He also alleged that those who invested in the assets do not have the prerequisite capabilities to manage the sector rather they were able to buy the assets because of political patronages.
Olubiyi said, “There were people who came on board in October - November 2013, and Nigerians felt that we needed to have a paradigm shift against public funding in the power sector, as what was obtained in the Telecom sector. So, we decided to privatise but where we got it wrong was that most of those that bided for the power assets were predetermined. So, the standards for the process were lowered to accommodate certain interests.
“One of the benchmarks for the technical and financial due diligence for the privatisation was that anybody that is going to win the process must have globally defined pedigree; must be in the business of management of power over a certain number of years, but most of the people that were bequeathed the sector just came into being a week before the privatisation, to edge out big names who had the experience because they were not the preferred, we equally have what is called delay payment.”
“So invariably the person has not brought any value to the table. What we expected when talking about the paradigm shift in the public sector-driven business model where we experienced a lot of wastage is for the private sector to improve on what they met on the ground.
“Ikeja DisCo had zero transformer failure, Eko had 5 percent transformer failure, that had issues as at the time it was privatised but as I speak to you now most of those investors did not have technical and financial capabilities so they had to approach the banks to borrow money to acquire licenses and capital investment," he added.