Forex crisis: Discos buy electricity in Dollars at N500


…as banks reject fresh loans, Records 50% electricity loss

By Samuel Ibiyemi

There are indications that problems of the power sector is far from over as investors of Electricity Distribution companies (DISCOs) lamented that payment for electricity is now being purchased in Dollars from the Nigeria Bulk Electricity Trading Plc (NBET) at parallel market rate and banks rejecting request for loans needed for fresh investment.

A source close to the Association of Nigerian Electricity Distributors (ANED) disclosed that Discos had been purchasing electricity from  gas and hydro power stations at parallel market rate which ranged between N450 and N500 per Dollar contrary to the directive of President Muhammadu Buhari recently  that no transaction within the country should be carried out in Dollar.

During an enquiry, the Managing Director of Ibadan Electricity Distribution Company (IBEDC) Mr. John Donnachie confirmed that purchase of electricity in Dollars at parallel market rate is one of the liquidity challenges facing electricity distribution companies. This purchase of electricity in Dollars at parallel market rate and sales of electricity to customers in Naira has contributed to increase in loss figures and inability to secure fresh loans from banks. “As a result of our high exposure  resulting from purchase of Electricity at black market rate and selling to consumers at prices  that is  50 per cent below cost, no bank is willing to approve loans for any of the distribution companies,” he lamented.

According to him, the  foreign exchange  has gone from N198 to over N300 on the official market which  can’t  be bought  at $1 dollar on the official rate except the black market at N500. So, we pay   more than double the price of anything and everything is driven by the  forex market in this industry.

“Our gas is supplied to the generators in dollars. The hydropower is sold in dollars and even the water generated is charged in dollars. So, the forex is a major influence on our ability to buy electricity meters,” he said.

Donnachie added that the DISCOs cannot fund the FOREX on behalf of government neither can they do that on behalf of customers. As a result, he lamented that no bank wants to lend money to his company to buy meters.

He said “We are not fighting the government but the sector is not in good position. We can only get  money from two places that is government and customers. The customer does not want to pay for electricity  because they do not  understand the total cost of electricity.  Most of them are upset with us because of power inconsistency and quality. “

These challenges, he said was beside inadequate  gas supply by producers  and electricity supply by the power generation companies as well as absence of cost reflective tariff.

For instance, he stated that IBEDC was receiving 300 mega watts instead of 900MW.

 “However, we have supplied over 144,000 meters to customers in the last three years to ensure that customers are properly billed,” he noted.

He also blamed the challenges of the investors on 50 per cent loss of electricity being bought before billing as a result of meter bypass and other technical issues. This, he said should not exceed 24 per cent by industry standard before Discos can break even. “if the 50 per cent loss estimate is to be utilised in the determination of cost reflective tariff, residential customers of R2 are expected to pay about N42 Kilowatt hour (KWH) while Maximum Demand customers  will pay N105KWH,” he stated.