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Hurdles hound FG’s plan to sell 40% shares in Discos

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The Federal Government’s plan to divest its 40 percent stake in electricity distribution companies (DisCos) faces mounting challenges, raising doubts about its 2024 timeline, BusinessDay findings show.

Experts said the path to full privatisation is riddled with hurdles – from investor scepticism to market jitters.

Chigozie Nweke-Eze, CEO of Integrated Africa Power, said one of the hurdles facing the sales of the government’s assets is institutional. According to him, there are questions regarding corruption and pressure points.

“It’s a welcome idea to privatise because the private sector seems to be more efficient and more profit-seeking. But the government needs to ask if the previous problems with the DisCos are solved before handing over 40 percent of its shares.”

Nweke-Eze said that the government needs to sort out some issues before initiating the sales. “Otherwise, it’ll be a problem for the off-takers to operate.”

The Bureau of Public Enterprises (BPE) had on Tuesday disclosed plans to sell off the remaining 40 percent shares of the federal government in the DisCos and four other assets in 2024.

Other assets that will be sold off next year via public offerings at the capital market include Eleme Petrochemicals Company Limited, Nigeria Reinsurance, NICON Insurance, and the Nigeria Machine Tools in Osogbo, according to the BPE.

“Before selling any percentage shares in Discos, an audit of what is due to everyone must be done,” Jide Pratt, country manager of Trade Grid, said. “The Nigerian Bulk Electricity Trading or Discos should settle outstanding before any sale or new equity/share/percentage is injected.”

The Nigerian Electricity Regulatory Commission (NERC) had on May 15, 2023 announced the revocation of Kaduna DisCo’s operational licence owing to its indebtedness of N93.42 billion for unaccounted energy supplied to its area of operation.

With over 90 days after the expiration of the 60-day ultimatum by NERC, the DisCo still holds an electricity distribution licence, which gives it powers to continue to carry out the electricity business and normal operations in its licence areas of Kaduna, Kebbi, Zamfara and Sokoto states.

Efforts to reach Abdulaziz Abdulahi, head of corporate communications at Kaduna Electric, Abdulaziz Abdulahi, proved abortive.

“The larger dilemma revolves around a cost-of-living crisis, making tariff adjustments less effective without significant supply enhancements, which, in turn, require substantial investments. The key question remains: who bears the cost of this investment in the interim?” a top industry operator who pledged anonymity said.