The $500m Nigeria Distribution Sector Recovery Programme, aimed at addressing significant challenges in the country’s electricity distribution sector, has been hit by several delays, findings by The PUNCH showed.
A World Bank document on the restructuring of the project, obtained by The PUNCH on Monday, indicated that these delays, primarily due to a court case filed by the Association of Meter Manufacturers of Nigeria and a slow approval from the National Assembly, have threatened the timely implementation of the project.
The DISREP, approved by the World Bank in February 2021, is designed to improve the financial and technical performance of Nigeria’s electricity distribution companies.
The programme is a hybrid one, combining a Programme-for-Results component valued at $345m, with an Investment Project Financing component of $155m.
The funding aims to enhance Nigeria’s electricity sector by improving Discos’ performance, addressing the metering gap, rehabilitating distribution infrastructure, and strengthening governance.
However, the implementation of the project has been delayed due to a few factors, including a legal challenge that impacted the procurement of smart meters.
Court case
According to the document seen by The PUNCH, AMMON filed a court case challenging the procurement process for smart meters in April 2023.
The association argued that the International Competitive Bidding process, employed by the Federal Government for the bulk purchase of meters, unfairly excluded local manufacturers from participating.
The court case was discontinued by August 2023, but the damage had already been done.
The document read, “The FGN and NERC have decided that the priority in improving the performance of DisCos is to install smart meters to all customers who are currently not metered, which will immediately help reduce non-technical losses and increase collection rates.
“To that end, the FGN decided to procure smart meters through the ICB process under the DISREP programme because procurement through the ICB process will result in competitive pricing of smart meters, which will then allow the FGN to acquire more smart meters.
“Following the launch of the bidding process in March 2023, however, the Association of Meter Manufacturers of Nigeria filed a court case in April 2023 claiming that the ICB process for procuring smart meters was intentionally designed to exclude them from participating in the procurement process. The case was discontinued in August 2023, which then allowed the TCU PMU to continue the procurement process, however, it has delayed the ICB process by several months.”
The process to procure 1.44 million smart meters through international competitive bidding was delayed by several months.
With an estimated seven million unmetered customers in Nigeria, delays in meter procurement have exacerbated the problem of revenue losses and inefficiencies in the electricity sector.
NASS delay
In addition to the legal challenge, the National Assembly has been slow to approve the necessary components of the DISREP.
The programme was approved by the World Bank Board in February 2021, but the Federal Executive Council struggled to reach an agreement on key aspects of the programme.
One of the major issues was the Federal Government’s decision to extend loans to the privately-owned DisCos, which have underperformed since their privatisation in 2013.
After more than three years of deliberation, the Nigerian Senate finally approved the External Borrowing Plan on May 15, 2024, allowing the DISREP programme to move forward.
This approval facilitated the signing of contracts for smart meter procurement and enabled the disbursement of funds under the PforR component of the programme.
Despite this approval, the delays in legislative action have significantly impacted the overall progress of the programme.
The document also highlighted the difficulties in coordinating the efforts of various stakeholders involved in the DISREP programme.
The Bureau of Public Enterprise, which is responsible for overseeing the programme, has faced challenges securing the necessary buy-in from all DisCos.
These companies, with varying levels of commitment and capacity to implement reforms, have made the coordination process more complex.
The document read, “DISREP is a loan of $500m that was approved by the World Bank Board of Directors on February 4, 2021, and the Loan Agreement was signed on September 26, 2022. The Program became effective on February 2, 2023, and the FGN’s External Borrowing Plan, the DISREP Programme, was approved by the National Assembly on May 15, 2024.
“The significant delays in the signing of the LA resulted from the initial lack of consensus among the members of the Federal Executive Council regarding the Federal Government’s decision to provide on-lending to privately-owned DisCos that have not shown the substantial improvements expected at privatization in 2013.
“A first meeting of FEC discussed DISREP in June 2021, but it was not until another meeting on August 3, 2022, that DISREP was approved, after providing many clarifications that had been requested. The LA was signed in late September 2022 by the Honorable Minister of FMFBNP.
“Another source of delays for the implementation of DISREP was the lack of political consensus in the legislative, which led to DISREP being approved by the National Assembly in May 2024 only, that is more than 3 years after Board approval.”
By June 2024, the World Bank rated the programme’s implementation as “Moderately Unsatisfactory,” with improvements contingent on finalising the PforR on-lending agreements with all 11 DisCos.
The document read, “The latest Implementation Status and Results Report dated June 21, 2024, rated both the overall implementation progress and progress towards achievement of the PDO as Moderately Unsatisfactory.”
Despite these setbacks, there have been some positive developments in recent months.
In August 2024, contracts were signed for the procurement of 1.44 million smart meters.
These meters, along with an additional 217,000 meters procured through a limited domestic procurement process, are expected to help close the metering gap and reduce losses in the sector.
The implementation of Management Information Systems across the DisCos is also a key component of the programme.
The MIS, which includes the installation of Geographic Information Systems, Customer Management Systems, Outage Management Systems, and Enterprise Resource Planning systems, will help to modernise operations and reduce non-technical losses.
However, full implementation of these systems is expected only by 2027, with political and institutional challenges continuing to slow their deployment.
To address the delay encountered towards the implementation of this loan project, the Federal Government asked the World Bank to extend the closing date of the programme by 23 months, moving it to June 2028.
The document read, “The original timeline for the program’s closure was set for June 2026. However, given the challenges, it is prudent to propose a 23-month extension, pushing the program’s closing to June 2028. This extension would provide the DisCos with sufficient time to utilize the available funds effectively and make the necessary investments to improve their performance.”
The document also acknowledged the Federal Government’s effort to close the country’s metering gap through the Presidential Metering Initiative.
The PUNCH earlier reported that the Federal Government set aside N700bn to implement the distribution of free electricity meters under the Presidential Metering Initiative.
The amount being deducted from the monthly federation revenue before allocation to the three tiers of government is designed to resolve the metering gap which currently stands at 50 per cent.
The Managing Director of Abuja Distribution Electricity Distribution Company, Victor Ojelabi, recently said that the PMI would unlock about N1tn in revenue currently tied up in the Nigerian Electricity Supply Industry due to a large number of unmetered customers.
Under the initiative, the Nigerian Electricity Regulatory Commission announced the approval of N21bn for the 11 electricity Distribution Companies to provide meters for end-use customers at zero cost.
