The Central Bank of Nigeria (CBN) recently directed the Deposit Money Banks (DMBs) to take charge of collection of electricity bill payments, a move experts said is part of the forensic audit process for the power sector.
In a circular signed by Hassan Bello, director of banking supervision, CBN said the move is in line with a directive of the Power Sector Coordination Working Group to improve payment discipline in the Nigerian Electricity Supply Industry (NESI).
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The 11 Distribution Companies (DisCos) collect electricity payments for energy generated and consumed by power consumers on behalf of the power sector value chain.
The DisCos pay this revenue to the Nigerian Bulk Electricity Trading Plc (NBET) for the bulk electricity they get from the Generation Companies (GenCos) through the facilities of the Transmission Company of Nigeria (TCN), while they pay TCN for ancillary services including regulatory services charge by the Nigerian Electricity Regulatory Commission (NERC).
The latest CBN circular stated that banks providing guarantee to NBET and TCN on behalf of DisCos would take responsibility for collections of concerned DisCos and remittances of the DisCos to both NBET and TCN.
Also, that the payment or settlement of all NESI related goods or services shall be made through the Nigerian banking system.
Consequently, all collections for the payments of NESI regulated goods and services provided by a DisCo shall be paid into a designated account such that collections arising from services rendered by the DisCo shall be paid into an account in the sole name of the DisCo.
“Collections arising from services rendered by third party/parties on behalf of the DisCo shall be paid into an account in the joint name of the DisCo and the third-party vendor(s).”
“All energy and non-energy collections of DisCos, whether cash or cashless, shall only be performed by Deposit Money Banks (DMBs).
“No entity shall be permitted to collect revenues for DisCos except if that entity is so authorized by a DMB in line with the relevant CBN guidelines for agent banking and agent banking relationships,” CBN said.
The apex bank will also come hard on any defaulter.
“DMBs shall be permitted to authorize its agents to collect energy and non-energy payments on its behalf for any DisCo; the actions or inactions of the agent shall be the responsibility of the authorizing DMB.
“Any DMB found to be maintaining any account(s) for any entity collecting payments on behalf of any DisCo without appropriate authorization shall have regulatory actions imposed on it.”
– Electricity market groans under N1.8trn shortfall –
The Nigerian Electricity Market (NEM) is dragging slowly under the burden of an estimated N1.8 trillion shortfall occasioned by poor revenue collection, inappropriate tariff, and other Aggregate Technical, Commercial and Collection (ATC&C) losses across the 11 DisCos.
While the DisCos were remitting over 60 per cent of their invoices for generated energy payment when the private investors took over the privatised assets in 2013, the monthly payment had declined due to these challenges and reached a low level of below 30 per cent in 2019.
To stem this tide, NERC introduced the Minimum Remittance Order (MRO), fixing a collection threshold and also threatened to withdraw the licence of eight DisCos in 2019.
While there are plans to increase the electricity tariff to improve revenue collection, NERC had tasked the DisCos to do some internal cleansing.
However, details of one of the payments this year showed that the DisCos owe over N600 billion plus accrued N300bn interest for an unremitted percentage of energy payments.
– NERC issued directive 9 months earlier –
The DisCos had often blamed their customers and power users for not paying electricity bills.
However, through the Meter Assets Providers (MAP) scheme and a recent one year waiver on imported meters by President Muhammadu Buhari, consumers expect to have more meters to monitor their power consumption and rid the sector of the estimated bills which are often contested by consumers.
However, to also help in verifying the low revenue claims of the DisCos, NERC in December 2019 directed that the DisCos from January 2020 should migrate electricity payments to cashless transactions.
It said the over 10 million customers then should only use cashless means to settle their payment obligations.
The Order No. 183 signed by the NERC Chairman, Prof James Momoh, was in compliance with the cashless policy directive issued by the Federal Government.
“All DisCos shall transmit to cashless settlement platforms for the billing/collection of industrial and commercial customers by 31 January 2020.
“For the R3 class of residential customers, DisCos should migrate them from 31 March 2020.
“All DisCos shall ensure the successful transmission of customers to cashless settlement platforms.
“Apart from the DisCos providing payment platform, addresses and order channels, they must deploy standard customer’s management systems (CMS), vending platforms and other technology solutions,” NERC had stated.
This paper gathered that while some DisCos complied, there are defaults from others, prompting the present directives to the bankers of the DisCos to take responsibility for enforcing this directive.
– We’re adopting cashless process – Operators –
Some operators of the DisCos said before the directive, they were already transiting to cashless transactions.
For instance they said the MAP meter acquisition scheme is completely cashless as consumers are directed to pay to the bank and present receipts to the DisCos to process their meter installation.
Another point is the recharge of meters.
The DisCos said with the massive roll out of meters since 2016, meter token recharge has been mostly a cashless process using agents like Buypower, Kallak, among others, where one can generate meter tokens from banks or through the online platforms provided by the agents.
The management of the Abuja Electricity Distribution Company (AEDC) earlier said it has put in place every necessary arrangement to ensure full migration of its Industrial, Commercial and R3 Residential customers to the cashless platform.
According to the General Manager, Corporate Communications Mr. Oyebode Fadipe, “This cashless policy is dynamic, easy and simple. It has the potential to strengthen our revenue base as a DisCo and improve payment convenience to our customers.
“Customers can look forward to improved real time value for payments they make through any of the cashless solution channels,” he said.
Meanwhile, Eko Electricity Distribution Company (EKEDC) had said it was the first to pioneer the cashless transaction among the DisCos, assuring that it was complying and expanding the scope.
The Association of Nigeria Energy Distributors (ANED) had welcomed the process, noting that it was better for the DisCos.
– DisCos’ forensic audit critical – Consumers, Experts –
Earlier this month, some experts in the Nigerian Electricity Supply Industry (NESI) told our reporter that they welcome any move by the Federal Government towards carrying a forensic audit on the DisCos. With the latest CBN guideline, they said, it was a move towards the forensic audit.
The World Bank has insisted on running a forensic audit on the 11 DisCos before they could access a $500 million loan.
Daily Trust on Saturday reports that between 2016 and 2017, NERC had applied the Open Book policy on DisCos’ accounts after audit reports showed that the DisCos revenue collection was not that bad as they had assumed.
The call for the forensic audit is also part of the recommendations of the National Economic Council (NEC) Committee on power sector review led by Governor Nasir El-Rufai earlier this year.
However in a report of the latest meeting held by NERC and other stakeholders, at least 10 DisCos have said they will only allow the forensic audit of their activities if NERC and the World Bank (which were to do the audit) extend it to a power system audit encompassing the entire value chain of the sector rather than isolate DisCos alone.
But moving against this, the Federal Government has found a way through the CBN to proceed with the monitoring of the DisCos’ accounts income and receipts.
The Executive Director, PowerUp Initiative, Adetayo Adegbemle, said, “By market design, DisCos are the money collectors of the market.
“If the market thinks that there is some form of financial improprieties, NERC, pursuant to section 32, 96 has such powers to conduct that.”
Engr. Amos Okon, a power consumer in Abuja supported the cashless policy order saying it will eliminate middlemen under AEDC.
“There are times that collection agents defraud customers.
“You pay a certain amount and another figure is written on the bill.
“But since we started paying by cashless through the AEDC InCMS platform, everybody in the estate can monitor what we collectively pay and what the bills are.”
The Nigerian Consumer Protection Network (NCPN), a consumer group, reacting to the CBN policy said the process was in order.
The President of NCPN, Kunle Kola Olubiyo, said: “It is in order. Federal Government commences water tight forensic auditing of regulated Entities in the Nigerian Electricity Demand and Supply Industry.”
He said the process is actually a Condition Precedent to midterm review of the power sector privatisation exercise which should have been done five years after the power privatisation has been done (by 2018).
“But the Government represented by relevant organs has repeatedly and perpetually shifted the pole.
“The sector has suffered badly from huge settlements crises and bad behaviours, Fiscal indiscipline and all of leakages, higher incidences of poor collections efficiencies, poor revenue efficiencies and poor billing efficiencies,” Olubiyo noted.
However, the consumer group called on the CBN to institute a wider fiscal policy on the power sector to boost transparency of the payment and expenditure system, and provide a stable foreign exchange (forex) window for the operators.
“For this bold step by the Central Bank of Nigeria to make sense, the exercise must be holistic, and with a total overhaul of the power sector value chain.
“Government should also address all the crises linking to exchange rate volatility for the sector.”
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