The lifeline by the Central Bank of Nigeria(CBN) through various intervention funds may have saved Deposit Money Banks(DMBs) and the power sector from imminent collapse.
Some industry observers insisted that the backing of Deposit Money Banks (DMBs) by the CBN in the take over of some Distribution Companies(Discos) and the roles being played by the apex bank to ensure their shares are successful transferred to new investors remained a leeway for the financial and power sectors.
“I love the fact that CBN came into the power sector, not just to save the power sector. Don’t forget that, even though they have roles to play in the sector but they came in to save their own banking sector.
“The loans that the power sector took from the banks have become bad and if you do not do anything it is going to be on the books of the banks. So CBN backing the banks to take-over the shares is a good thing for CBN,” he said.
Energy lawyer, Madaki Ameh, had stated that there was need for the total overhaul of the sector, insisting that the overhaul is long overdue and the takeover of the DisCos remained legally justified under the terms of the agreement, which brought them into the Nigerian Electricity Supply Industry (NESI).
He said the DisCos have not met any of the minimum thresholds set for them by government since privatisation despite the huge investment the government has continued to make in the sector.
“If you compare happenings in the power sector with the telecoms sector, you will see clearly that there were structural defects with the implementation of the privatisation policy in the power sector and that nothing short of a total take over of the DisCos and some of the non-performing GenCos would deliver the sort of efficiency required to transform the Sector in Nigeria,” Ameh said.
Backed by the apex bank, DMBs had taken over five DisCos amidst poor performance and inability to pay back loans, a development which is already putting some banks on the edge of collapse.
With indications that the government’s intervention fund to the power sector now hover around N2.9 trillion since the sector was privatized in 2013, stakeholders insisted that the total collapse of the power sector would have had serious implications, not only for the banks but the entire economy.
In what has been described as poor financial performance, Abuja DisCo, Ibadan DisCo, Kano DisSo, Kaduna DisCo and the Benin Electricity Distribution Companies (BEDC) have been at loggerhead with the banks in a move backed by the CBN, Nigerian Electricity Regulatory Commission (NERC) and Bureau of Public Enterprises (BPE).
Credit: Daily Sun