The failure of the Nigerian Electricity Distribution Companies (DisCos) was due to lack of financial depth, planning, weak regulation and due diligence along the power value chain. As in most privatizations of government assets in Nigeria, vested interests who perceived the power sector like the GSM, didn’t understand the peculiarities of that sector.
I did sound the warning, that a number of the Discos, most of which were over leveraged, would end up like the banks that were taken over by the Central Bank of Nigeria (CBN),during the first meeting Tunde Fashola, as Power & Works Minister, held with all the Market Participants at the Transmission Company of Nigeria (TCN) auditorium in 2015.
And coming from the private sector in 2013 on appointment by President Goodluck Jonathan, as Executive Director of Finance & Accounts of TCN, I saw the early warning signs and danger ahead and didn’t need a soothsayer to predict what would happen down the line to the DisCos and the power sector. It was just a matter of time.
Some of the assets were sold to the wrong players and the banks, didn’t have the technical capacity to appraise power sector assets and cash flows. The operation of the sector without a cost reflective tariffs and poor supervision were some of the challenges that the DisCos faced.
And if some of these challenges which still exist in the sector are not adequately addressed and ameliorated, more DisCos are likely to either declare force majeur or taken over by the financial institutions that provided the acquisition funds.
NB: Sonny Iroche is at the African Studies Centre, University of Oxford, England
