Illiquidity: MAN Calls for Recapitalisation of Discos

*Urges unbundling of 11 power distributors to 36

Emmanuel Addeh in Abuja

The Basic Metal Fabricated Iron and Steel Products Manufacturers, an arm of the Manufacturers Association of Nigeria, (MAN) yesterday called for the recapitalisation of the power Distribution Companies (Discos) in Nigeria to solve the perennial illiquidity in the sector.

The Chairman of the section, Dr. Kamoru Yusuf, in statement in Abuja, noted that despite the pledge by the Discos to invest in infrastructure, not much had been spent, resulting in weak and obsolete facilities.
According to MAN, in spite of the intervention by government and international organisations, the state of Discos’ infrastructure remains a far-cry from the expected minimum.

“There is therefore, urgent need to revalue the capital base of Discos and increase same to achieve meaningful investment in their network. This will largely address the sector liquidity issues.
“There is also need for urgent revaluation of the capital base of the electricity investors in the Discos, and possible increase in the capital base. Over the years, Discos have continuously lamented over paucity of funds.
“This is however at variance with the commitment of the Discos to invest in the area of infrastructure most of which are weak, obsolete and overdue for overhaul and upgrade,” it stated.

It called for further unbundling of the current distribution part of the value chain as it has been canvased severally that the coverage areas for the Discos are too large and would not make for effectiveness.
MAN suggested that the 11 Discos should be broken up into 36 separate entities to ensure effectiveness as well as better monitoring, insisting that it is clear that most of the Discos do not have the capacity to oversee the large space they are currently operating in.

In addition, it called for the development and monitoring of Discos’ implementation Performance Improvement Plans (PIP) and a mandate to construct a minimum of 5 kilometres of new lines every month, complete with both Transmission Company Nigeria (TCN) interface projects.
“TCN should also be required to periodically upgrade the equipment and infrastructure. Discos should be mandated to set up and operate electric pole manufacturing companies within their franchise area to meet their pole requirement and support the PIP.

“This is practiced in China and other countries of the world, and this has enhanced Discos performance in such climes. Interestingly, it costs only $2 million to set up a standard concrete pole company with a capacity to produce a minimum of two kilometres worth poles daily.

“This will bridge the deficit in their pole needs and eliminate cases of substandard poles provided international standards for pole manufacturing are complied with,” Yusuf argued.
He further urged the authorities to operationalise the Eligible Customer Regulation (ECR) to take care of the stranded 2000MW, to allow companies purchase the stranded energy directly from willing Generation Companies (Gencos).

“It is almost four years after the ECR came into effect, yet none of the several applications has been approved by NERC due to bottlenecks. There is need for the regulators and more particularly NERC to urgently simplify the ECR and its processes to make it operational,” he lamented.

While advocating more regulatory consistency on the scheme, the MAN sector urged the regulator to ensure prompt enforcement of policies to achieve the desired change as well as an anti-theft and vandalism legislation.