Convert power sector debt to equity to attract investment, analysts tell FG
CONCERNED by the huge over-indebtedness that is unsettling Nigeria’s struggling power sector, analysts have called on the federal government to convert that debt into equity to unlock investment in the industry.
The Nigerian power sector is hobbled by huge debts amounting to trillions of naira. He is currently living on a monthly subsidy of N30 billion.
This development not only disrupts the efficient supply of electricity, but aggravates liquidity problems in the electricity sector.
Jit HERE The survey, released in July 2021, showed that federal, state and local governments, ministries, departments and agencies owe DisCos N202 billion.
The Electricity Distribution Association of Nigeria (ANED), which reacted to the development, confirmed that the Federal Government had verified N48 billion as MDA debts, while N61 billion had yet to be confirmed. .
ANED further noted that the verification did not include the estimated N93 billion owed by the armed forces and security agencies.
Speaking on these concerns, analysts familiar with the sector have called on the federal government to explore debt-equity swap options to attract investment into the sector.
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“No silver bullet to the solution, the factor is that the power industry and the guys who bought it bought a poisoned gift,” Financial Derivative Company chief executive Bismarck Rewane said in a TV interview. watched on Arise Television.
“The total outstanding debt to the power sector is expected to be around N2 trillion.
“What do we do? Give it and convert it into shares. In other words, if I owe 10 billion naira and I advance 1 billion naira, my capital is now 10 %.
“The N9bn which is now held by the government will now be sold at a reduced price to people who can buy so that they can come in and remove it,” he suggested.
Rewane also noted that as the reforms continue, the government should simultaneously adjust the tariff to reflect costs.
While proposing a similar solution, energy lawyer and energy industry analyst Chuks Nwani told ICIR that the debt should be converted into commercial paper as a matter of urgency.
This development, he said, would allow distribution companies to approach the bank to improve their financial situation.
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Nigeria’s power sector has been dragged down by massive debt, amidst many other challenges it faces
The government, in its attempt to address the liquidity problems in the sector, has since provided an electricity subsidy of N30 billion per month.
Although the government has hinted at plans to withdraw the subsidy, developments in the electricity sector show that government intervention in the sector is still inevitable.
The government is currently intervening through the National Mass Counting Program.
This saw the federal government step in, through the Central Bank of Nigeria (CBN). The Nigerian Electricity Regulatory Commission (NERC) confirms this development on its website.
The regulator also notes that the total number of electricity consumers as of November 31, 2021 was 12.848 million.
It also puts the total number of metered customers at 4.667 million. The total number of unmetered customers is estimated at 8.181 million.