BPE Opposes Gencos, Discos’ Sale Reversal, Proposes Subsidy
The Bureau of Public Enterprises has opposed the reversal of the privatisation of the country’s power sector despite calls on government from different quarters to repossess the power generation and distribution companies.
The bureau is also targeting the generation of N266.8bn as revenue from the sale and commercialisation of public assets in 2020.
Should it be considered inappropriate to pass higher cost recovery bills to consumers, the privatisation agency proposed a subsidy that can take care of the shortfall between tariff and cost.
The National Economic Council, comprising the states and the Federal Government, had recently set up a committee to review the structure of the power companies.
The development was largely informed by the inability of the distribution companies to meet the electricity needs of Nigerians, about seven years after they took over from the defunct Power Holding Company of Nigeria.
At an interactive session with journalists in Abuja on Wednesday, the Director-General of BPE, Mr Alex Okoh, said ‘re-nationalisation’ of the power sector would be a ‘fundamental error’.
The BPE boss, who identified implementation of the design of the reform of the power sector and the dynamics of retailing power as the major challenges also proposed the introduction of subsidy on tariffs.
Reacting to the planned review of the privatisation, as well as calls for recapitalisation of the Discos, Okoh said, “Recapitalising the Discos, will it solve the problem? Maybe, maybe not.
“But what I will not advocate as an individual is the re-nationalisation of the power sector.
“If we are able to determine that there is certain level of capital expenditure that is necessary to improve the distribution infrastructure, let us logically determine what that investment is and look at the best way to provide that investment for the distribution end of the power chain and not to re-nationalise the power sector.
“It will be a fundamental error if we go in that direction.”
Insisting on the need to address the price structure of power as an utility, he added, “The problem is not the privatisation of the Discos or the entire power value chain.
“The problem is the implementation of the design of the reform of the power sector.
“We have problems with Discos; we don’t have problems with Gencos.
“The Gencos were also privatised. How come the Gencos are doing well but the Discos are not doing well and they are in the same sector?
“The Discos are failing because the market dynamics of retailing power is not right.”
Noting that the Discos made a commitment to improve the efficiency of power distribution, while the government promised to provide an enabling environment, Okoh said there was a need for appropriate tariff.
“In case that price is not considered appropriate to be passed on to the consuming public, there will be some sort of subsidy but at the end of the day, the provider of the utility has to be able to recover the cost of providing that utility.
“We need to address the price structure of that utility and where we as a government find that it is not socially imperative to pass on the full cost, then perhaps we need to come in with some sort of subsidy,” he said.
Okoh, however, added, “Perhaps, some of the Discos lack capacity, whether technical or financial capacity.”
Noting that electricity per capita in Nigeria is 150kw per hour, while it is 5,527kw per hour in South Africa, the BPE boss said Nigeria had not started scratching the surface in resolving issues in the power sector.
He expressed the hope that the Presidential Power Initiative would be able to address the issues.
According to him, a major challenge is the mismatch of excess capacity in generation but low capacity in transmission and distribution.
Explaining that the Federal Government is targeting that distribution will rise to 7,000mw by 2021, Okoh said there was a need for coordination among agencies regulating the power chain.
The BPE has no problems with the review of the power sector privatisation by the NEC, Okoh added.
He said the bureau would be willing to address any gaps identified in the review.
Disclosing the bureau’s plans for 2020, he said the agency intended to generate a total net revenue of N266.8bn from the sale of public assets.
The fund to be realised from the transactions is to support the implementation of the 2020 budget.
Giving a breakdown of the projections, he said a total of N270.7bn was expected to be realised from 20 transactions.
The sum of N3.9bn would be expended on the transactions, leaving a net revenue of N266.8bn.
The bulk of the transactions are in the energy sector, where the BPE is targeting N268.3bn from nine transactions.
The transactions from which the BPE intends to generate the N266.8bn include carry overs from the 2019 Approved Work Plan, such as completion of sales of Yola Electricity Distribution Company, Afam Power Limited and Afam Three Fast Power.
The transactions also include the Nigeria Integrated Power Projects, according to a list made available by the Bureau.
Other transactions include sales of additional shares of Geregu to Amperion Power, Tafawa Balewa Square, Bank of Agriculture, Dowell Schlumberger Nigeria Limited, NMC houses, Nigeria Commodity Exchange, River Basin Development Authorities and Lagos International Trade Fair complex.
Also on the list are commercialisation of the Nigerian Postal Service, partial privatisation of Calabar and Kano Free Trade Zones, and Nigeria Reinsurance IPO.
New transactions are ACM of Nigeria Limited, Non-Operational Power Plants, development of infrastructural facilities at tertiary educational institutions and Nigerian Film Corporation.
However, it was listed among the transactions, Okoh further disclosed that the Federal Government had decided to keep Bank of Agriculture.
Noting that BOA’s shareholders’ funds was in the negative of about N35bn, while Non-Performing Loans was about N97bn, he said discussions were going on with the Central Bank of Nigeria to “write off some of the NPLs so that we can correct the negative shareholders’ funds” in order to recapitalise the bank with N15bn.
“We have taken a decision that for whatever it is worth, we should keep BOA rather than start a new agriculture finance bank,” Okoh said.
The BPE boss explained that the Aluminium Smelter Company of Nigeria was not handed over to BFI Group, which emerged as preferred bidder in 2004, because the investor failed to pay 10 per cent of the bid price within 15 days, as stipulated in the agreement.