DisCos Struggle with N2 Trillion Capital Deficit over Power issues

Electricity distribution companies in Nigeria (DisCos) are contending with an estimated capital deficit of N2 trillion and need fresh investments to rejuvenate the power sector.
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The Special Adviser on Energy to President Bola Tinubu disclosed this in an interview with Bloomberg.

She said, "We need to set policies that facilitate reorganization and recapitalization and bring in new partners with new capital. The recapitalization will accompany plans to make electricity tariffs cost-reflective, which will improve the liquidity and viability of the power sector."

However, the presidential adviser did not provide a date or more details for the recapitalization plan.

It is worth noting that President Tinubu pledged on January 1 to enhance electricity supply in the country.

While the country privatized generation and distribution in 2013, tariffs are determined by the Nigeria Electricity Regulatory Commission (NERC), a government agency.

Power firms are not permitted to charge enough to recover the cost of distributing electricity, with the government covering the difference as a subsidy to companies in the sector.

Without a tariff review, weakness in the naira – which slumped 50% against the dollar last year – and accelerating inflation could push energy subsidies to N1.6 trillion this year from N600 billion in 2023, according to NERC.

 “With the current tight fiscal space, government’s ability to cover this shortfall is challenged. These issues have exacerbated the financial-liquidity challenges in the sector,” Verheijen said.

Only 4,000 megawatts of Nigeria’s 13,000 megawatts of installed capacity for electricity generation are distributed to homes and businesses.

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