…Electricity distributors say huge consumer-debts inhibiting operations
Ike Amos 02 November 2016, Sweetcrude, Abuja – Economists and power industry experts are expressing fresh worries over rising level of indebtedness to banks by power sector players.
According to Professor of Economics and Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Adeola Adenikinju, the nation’s financial sector was currently being exposed to mounting risks due to the huge indebtedness of power firms.
The implication of this, SweetcrudeReports was told, is that liquidity squeeze and general hardship is being forced on the banks in this time of national economic recession.
But, Executive Director, Centre for Social Justice, CSJ, Mr. Eze Onyekpere, said power sector players should be able to provide for themselves and that there was no reason for their owing banks.
“There is no reason for there to be a liquidity crisis in the sector if all stakeholders play by the rules,” he said.
Adenikinju’s and Onyekwere’s views came as the Association of Nigerian Electricity Distributors, ANED, lamented the huge debts by consumers, which it said was crippling power companies’ daily operations, including ability to effectively handle their indebtedness to the banks.
In a statement in Abuja made available to our correspondent, Adenikinju blamed the power sector indebtedness to banks on the technical and economic losses that remained unacceptably high in the sector.
He maintained that many government agencies, powerful individuals and organisations were also indebted to the power companies, thereby, worsening the plight of the industry and limiting their ability to meet their obligations to the banks.
He said, “Most of these power companies are indebted to the banking sector, thereby exposing the financial system to high risks. A restructuring programme that could include a well-structured bail-out plan for the Discos should also not be ruled out.
“Technical and economic losses remain unacceptably high. Many government agencies and powerful individuals and organisations are also indebted to the power companies. The genuine concerns of the power companies must be addressed.”
To this end, Adenikinju called for a review of the Electric Power Sector Reform Act of 2015, while advising the Nigeria Electricity Regulatory Commission, NERC, to ensure that its policies were mutually beneficial to all stakeholders in the sector.
“I hold strongly the view that the extant enabling legislation in the industry the Electric Power Sector Reform Act of 2015 should be reviewed,” he said.
Continuing, Adenikinju lamented the impact of the Niger Delta crisis on the energy sector, particularly on the activities of the power generation and distribution companies, saying that apart from increasing the risk premium for petroleum companies working in the region, because of kidnapping incidence and the constant threat from the militants, the crisis has badly hit gas supply to the power generating plants.
This, according to him, has brought liquidity problems on the power firms since they do not have adequate power that would ordinarily translate to increased revenue and ability to pay back to the banks.
Also commenting on the liquidity challenges in the power sector, Mr. Onyekpere said the electricity distribution companies or DISCOs should have enough resources to operate, including servicing their loans, adding that if they don’t have enough resources, they should open up to new investors or to the Nigerian public.
“The dog in the manger attitude of those who bought public companies is no longer acceptable. The story about indebtedness is funny. Every DISCO should be able to disconnect debtors; sue in court for recovery of money owed and for services rendered and ensure that pay before service metres are installed in every home, office or company,” he said.
But ANED claimed that the nation’s electricity sector is currently being held back due to the enormous debt burden it carries.
Chief Executive Officer of ANED, Mr. Azu Obiaya, said the Discos now record an average monthly shortfall of N38 billion because of debt owed them by consumers, including the government ministries and departments, as well as a tariff regime that is not cost reflective.
Obiaya noted that the electricity market’s revenue shortfall had risen to N809 billion and could get to N1 trillion by the end of 2016.
These he said has made the power companies’ daily operations, including ability to handle indebtedness to the banks, difficult.