Ibekimi Oriamaja Reports.
The takeover of DISCOs by banks, according to experts, is exacerbating the power supply crisis.
Wants to know if the owners used the facilities as collateral. FG explains the reasons for the takeover and states that it is only temporary.
By Victor Ahiuma-Young Organized labor in the nation’s electricity sector has issued a strike notice to the Federal Government, rejecting bank takeovers of some Electricity Distribution Companies, DisCos.
In a 14-day ultimatum issued to the Federal Government on July 7, 2022, through the Ministers of Power, Labour, and Employment, among others, Organised Labour contended that “it is obvious that the owners of these DisCos would not have obtained loans from Banks with the DisCos/Facilities as collateral Pre-Privatization and there is no way the Banks will seize DisCos, GenCos, or any other Company before take-over under the pretence that they.
FG insists on new boards for Benin Disco, but others disagree.
$16bn Sowore knows nothing about the electricity project, says Atiku; just explain the power outage, he responds.
Labour, which recalled warning the Federal Government prior to the privatisation of assets of the defunct Power Holding Company of Nigeria, PHCN, that those pushing to buy lacked the financial and technical capacity to run the sector, insisted on being vindicated.
The National Union of Electricity Employees, NUEE, argued that “it does not make both technical and socio-economic sense for the Federal Government to indirectly hand over the operations of Electricity Companies to Banks.”
The strike notice, which was signed by the NUEE’s General Secretary, Joe Ajaero, among others, expressed concern about what the Union called “alarming developments in the Power Sector where Banks are practically taking over Distribution Companies (DisCos) and other Power facilities in the Country based on perceived defaults to repay loans allegedly borrowed by the DisCos.”
“It is on record that the Union issued a warning to the Federal Government and the nation at large regarding these companies’ lack of financial capacity to invest in the 18 Unbundled Companies in the Power Sector prior to its privatization.”
Unfortunately, the warning was ignored, and the Federal Government granted them these companies on the basis of loans presumably obtained from commercial banks. The Federal Government made it clear that investors possessed the financial and technological muscle to propel the sector.
“Now that the ‘chicken has come home to roost,’ it has been discovered that the majority of these Private Investors are unlikely to be able to repay the bank loans.” It is obvious that the owners of these Companies (DisCos) would not have obtained loans from Banks with the Distribution Companies/Facilities as collateral Pre-Privatization, and there is no way the Banks will seize DisCos, GenCos, or any other Company before take-over under the guise that they were indebted to them.
“Previously, we had called for a review of the privatization process, which had obvious flaws.” It does not make technical or socioeconomic sense for the federal government to hand over the operations of electricity companies to banks in this manner. This has played a role in the near-collapse of the power sector. It’s also hard to believe that the federal government is considering more privatization in the power sector. We’re ready to go.
“In light of these developments, and because the jobs of our members are being threatened with job losses, nonpayment of salaries/allowances, and the increasing difficulty in running these business concerns on a daily basis, as well as the general disquiet characterizing the Sector, we call for the immediate exit of Banks (whose presence has been a distraction) from these Power facilities.”
“Based on the foregoing, the Union issues a 14-day notice for these and other issues, including the obnoxious letter from the Head of Service, for which notice has been given and has expired; to address these issues or our Services will no longer be guaranteed.” This is not a danger.”
Meanwhile, in a response letter dated July 20, the Federal Government explained that “the recent change in the equity ownership of some of the Electricity Distribution Companies (DisCos) was a lender action, stepping in to take over the shares of the associated core investors largely as a result of failure to honour debt obligations.” It is worth noting that this is not due to a debt owed by DisCos as separate legal entities. The involvement of the Banks on the Board is thus a result of the DisCos’ ownership and corporate governance.
“We would like to reassure the leadership of your Union that the Central Bank of Nigeria, as the banking industry’s regulator, has already stated that it will ensure that the banks do not hold the shares in perpetuity.” In this regard, banks would exit these public utilities early to allow for the sale of the shares to other competent operators in accordance with current government policy on the reform agenda, as well as the oversight of the relevant government agencies for such transactions.
“The overarching goal is to ensure that consumers receive adequate and reliable electricity service in a way that does not disrupt the DisCos.” In this regard, the utility employees are critical partners in achieving the aforementioned goals.”
