BPE May 31, 2024

Federal Government Secures $500 Million World Bank Loan to Bolster Nigerian Electricity Distribution Sector

In a strategic move to address the identified gaps in the Electricity Distribution Companies (DisCos), the Federal Government of Nigeria has secured a $500 million loan from the World Bank. 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) 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). Key areas of improvement include: 

• 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. 
• 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 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 

The $500 million DISREP loan from the World Bank offers concessional financing with more favorable terms than commercial bank loans. This will enable the DisCos to: 

1. Invest in critical distribution infrastructure. 

1. Improve ATC&C losses. 

1. Increase power supply reliability. 

1. Achieve financial sustainability in the power sector. 

1. Enhance transparency and accountability. 

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, obtained 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. 

To ensure repayment assurance, the Bureau of Public Enterprises sought and obtained approval from the Nigerian Electricity Regulatory Commission (NERC) and the National Council on Privatisation (NCP) for a structured repayment hierarchy. This structure prioritizes payments as follows: 

1. Statutory Payments (Taxes) 

1. Repayment of CBN market loans 

1. Market obligations 

1. Repayment of DISREP loan 

1. DisCos’ net revenue 

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

Amina Tukur Othman 

Head, Public Communication