Experts: NERC’s Sack of Kaduna Disco Signals Deeper Rot in Power Privatisation
Peter Uzoho
The decision by the Nigerian Electricity Regulatory Commission’s (NERC) to sack the board and core investor of Kaduna Electricity Distribution Company (KAEDCO) over a N456.5 billion debt has laid bare the structural failure of Nigeria’s power privatisation, some industry experts have argued.
In a statement issued last week, NERC said KAEDCO’s accumulated market liabilities exceeded N450 billion and that Aggregate Technical, Commercial and Collection (ATC&C) losses stood at over 71 per cent.
Consequently, NERC dissolved the ASI Engineering-led board of the Kaduna Disco, appointed an interim management team for a period of six months and asked the African Export-Import Bank (Afreximbank) to secure a new core investor for the company.
But industry experts said sacking KAEDCO’s board treats the symptom, not the disease.
They argued that without resolving observed governance gaps at the Bureau of Public Enterprises (BPE), clarifying the role of lenders, injecting long-term capital, and aligning tariffs with cost, Nigeria risks recycling the same crisis in other Discos.
Sharing his thoughts on the matter, energy expert and Chief Executive Officer of New Hampshire Limited, Mr. Odion Omonfoman, told THISDAY that the regulatory action raises “critical questions about market oversight, governance structures, and the long-term viability of lender-led utility turnaround.”
Omonfoman framed four questions the power industry must now confront, asking why regulators waited so long before taking such action.
“Where was the regulatory intervention window? How did market liabilities accumulate to over N450 billion before decisive regulatory enforcement took place? Allowing under-remittance and performance deficits to compound over years without timely intervention creates systemic debt that becomes nearly impossible for any incoming operator to resolve,” he said.
He questioned the role of BPE which holds 40 per cent equity on behalf of the federal government across all Discos.
“Where was the proactive BPE oversight as debt accrued and non-performance by the initial core investor and the recent core investor (ASI Engineering) persisted?”
Besides, he faulted the growing reliance on banks to manage and run utility power companies.
According to him, following defaults, lenders Afreximbank and Fidelity Bank have stepped in via direct agreements, warning that banks are not operators.
“However, banks are not utility operators, and privatisation was never intended to replace private power operators with financial institutions. We have already seen lenders holding on to utilities for two-three years (e.g Benin Disco) without significant capital injection or operational turnaround,” he pointed out.
He also questioned Afreximbank’s plan to secure a new core investor, arguing that expecting a new core investor to step in within 12 months to absorb a N400 billion debt burden while injecting fresh equity was unrealistic.
Omonfoman argued that capital of this scale requires a long-term restructuring horizon of up to five -seven years, adding that lenders must confront the reality that equity value has been severely impaired.
He said the matter should be escalated beyond NERC and BPE to the National Council on Privatisation (NCO), noting that the Chairman of the Presidential Taskforce on Power Sector Reset, Dr Lanre Babalola now has his work cut out for him.
However, a professor of Economics at the University of Ibadan, Adeola Adenikinju, backed NERC’s action but said it only scratches the surface.
“I think what the NERC has done is correct, is right. There is a need to sanction stakeholders that are not performing creditably according to the privatisation guidelines or the rules of the market,” he said.
He said KAEDCO’s case reflects a market-wide solvency problem, noting that many other Discos had also been sacked and received by the banks or removed by NERC.
Adenikinju said all of this was evidence of the insolvency of the current market structure, which is only surviving by the support of the federal government.
He argued that every player in the privatisation chain has defaulted and have not been able to keep to their commitments under the privatisation plan including the government, the Transmission Company of Nigeria (TCN) and Generation Companies (Gencos).
The solution, he said, requires capital, not just sanctions.
“It is very clear that they do not have the capital that is required to be able to deliver on the stable electricity supply… There is a need to inject additional capital that will allow these companies to be able to upgrade their equipment and infrastructures, reduce the losses that are in the system, and ensure that we have adequate meters that will also reduce commercial losses,” he explained.
He also called for a review of tariff policy, stronger enforcement against energy theft, and modernised transmission.
“The tariff policy has to be reviewed. There is so much gap between the cost-reflective tariffs and what is actually being paid. So, there are a whole lot of challenges in the industry. And I think it needs to be overhauled. Everybody must sit at the table and find a way of addressing all of these challenges.”
On his part, President of Nigeria Consumers Protection Network, Mr. Kunle Olubiyo, said NERC’s intervention followed years of engagement.
“NERC has over a period of three years been communicating with Kaduna Disco to know how far they were meeting up with their obligations… NERC would have over a period of 36 months, conclusively reached a conclusion that there may be nothing different based on their inability to meet up the performance obligation,” he argued.
Olubiyo said the commission has had to act like an asset management company, absorbing liabilities to keep the market afloat.
“NERC, like the asset management company, has been absorbing a lot of liabilities of the Discos due to the imbalance in their balance sheet. NERC has a way of absorbing their balance sheets to make sure that they reduce the burden of debt and their financial risk exposure,” he added.