The Centre for the Promotion of Private Enterprise,CPPE ,has said that more power distribution companies in Nigeria could slip into receivership soon.
Its Chief Executive Officer,Dr.Muda Yussuf,who said this in a statement on Thursday,said the development follows Ikeja Electric’s receivership row inspite of it being touted as the best-performing electricity distribution company in the country with a prosperous customer base.
He lamented the persistent challenges of the power sector, which he posted has become a troubling conundrum.
These challenges,he said, stem from flawed privatization processes, ageing equipment, limited technical and financial capacity of the power distribution firms, problematic pricing and tariff structures, coupled with affordability concerns among the citizenry and an unsustainable subsidy regime.
He maintained that the result has been an acute liquidity crisis in the sector.
He added:”There are additionally clear conflicts between the commercial objectives of private investors (DisCos and GenCos), the citizens’ desire for affordable electricity, the quest by industrialists for an investment-friendly electricity tariff, and a politically acceptable tariff regime.
“The government’s obstruction and the citizens’ opposition to cost-reflective tariffs, despite demands from private investors in the sector, further complicates the situation. This created numerous contradictions and conflicts that require careful and painstaking strategic resolution.
‘What has happened to the DISCOs is also partly a consequence of the prohibitive interest rate in the economy, given the high degree of leveraging of most of the DISCOs. It is very difficult for any long-term project to survive the current excruciating lending rate in the economy.”
He advocated the need for government’s urgent intervention to prevent a complete collapse of the national power ecosystem.
According to him,while a sustainable framework for power sector liquidity and subsidies is being developed, the government must take immediate steps to stabilize the sector.
He said:”Meanwhile, the worry now is that in a receivership, banks primarily seek to recover their funds, typically disregarding economic development, social, environmental or productivity objectives. The overriding objective would be debt recovery, even if it means liquidating the assets. The ultimate victims of a power sector collapse are citizens, industries and investors.”
