Experts: NERC’s Sack of Kaduna Disco Signals Deeper Rot in Power Privatisation

Nigeria's electricity sector is facing scrutiny following the Nigerian Electricity Regulatory Commission's (NERC) decision to dissolve the board and core investor of Kaduna Electricity Distribution Company (KAEDCO). The move was prompted by KAEDCO's accumulated market liabilities exceeding N450 billion and Aggregate Technical, Commercial and Collection (ATC&C) losses surpassing 71 percent.

NERC appointed an interim management team for six months and tasked the African Export-Import Bank (Afreximbank) with finding a new core investor. However, industry experts contend that this regulatory action merely addresses the symptoms rather than the root causes of the power sector's persistent problems. They point to a pattern of structural failures within Nigeria's power privatization framework.

Experts like Odion Omonfoman, CEO of New Hampshire Limited, question the prolonged delay in regulatory intervention, asking why market liabilities were allowed to balloon to such an extent before decisive action was taken. "Allowing under-remittance and performance deficits to compound over years without timely intervention creates systemic debt that becomes nearly impossible for any incoming operator to resolve," he stated.

Further concerns are raised about the role of the Bureau of Public Enterprises (BPE), which holds a 40 percent government equity in all distribution companies. Experts question the BPE's oversight in allowing debt to accrue and performance to falter under successive core investors. Additionally, the increasing reliance on banks to manage and run utility companies is criticized, as banks are not operators and their involvement has not always led to significant capital injection or operational turnarounds.

The plan for Afreximbank to secure a new core investor within 12 months, who would then absorb a substantial debt burden while injecting fresh equity, is deemed unrealistic by some. Experts emphasize the need to address governance issues, clarify lender responsibilities, inject long-term capital, and align tariffs with costs to prevent similar crises from recurring in other distribution companies.

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Allowing under-remittance and performance deficits to compound over years without timely intervention creates systemic debt that becomes nearly impossible for any incoming operator to resolve.