Nigeria Set to Auction Off Kaduna Electric Amidst Financial Struggles
Nigeria’s electricity regulator is preparing to auction off Kaduna Electricity Distribution Plc (Kaduna Electric), the country’s sixth-largest power distribution utility, due to its increasing debt burden.
This decision comes less than two years after lenders took over the company in an attempt to improve its financial situation and profitability, which ultimately proved unsuccessful.
According to a report by Reuters, the Nigerian Electricity Regulatory Commission (NERC) has disclosed that Kaduna Electric is in debt to the tune of N110 billion ($130 million), owed to various entities including the Nigerian Bulk Electricity Trader and power generation firms.
Kaduna Electric, one of the 18 successor companies formed after the privatization of the defunct Power Holding Company of Nigeria in 2013, operates in four northern states.
Consequently, the regulator has classified the company as a ‘failing licensee’ and is invoking a recently passed law to dissolve its board.
Despite being Africa’s largest economy, Nigeria’s power sector has been facing numerous challenges. The 11 power distribution companies in the country struggle to maintain profitability due to capital deficiencies and the burden of sub-economic tariffs imposed by NERC.
In July 2022, African Export-Import Bank (Afreximbank) and local lender Fidelity Bank took over Kaduna Electric, but their efforts to improve its financial performance have encountered significant obstacles.
Additionally, the Nigerian government still holds a 40% stake in the company through the Bureau of Public Enterprises (BPE). The BPE had previously announced plans to sell the remaining 40% government stake in electricity distribution companies (discos) and four other assets in 2024.
This move is in line with the government’s strategy to generate revenue, reduce fiscal burdens, and attract increased investor participation in the economy. The government aims to raise N298.4 billion in revenue through the privatization of assets in 2024.
This approach is intended to address public debts, stimulate macroeconomic growth, and enhance investor engagement in the Nigerian economy, as highlighted by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun.
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