Why FG Should Divest Its 40% Stake In Electricity Discos Through The NGSE

Media reports on Wednesday, August 14, 2019, were that the leadership of Nigeria’s Senate declared support for the proposed recapitalization of Nigeria’s 11 electricity distribution companies (Discos) by the Federal Government.
A statement by the Ministry of Power was quoted as saying the senators agreed that the recapitalization which will see the government divest its 40% stake, will be more beneficial to Nigeria and indeed the power sector.
Senate President Ahmad Lawan, the statement added, spoke when he received a management team of the Transmission Company of Nigeria (TCN), led by its Managing Director, Usman Mohammed, in his office.
Lawan was quoted as saying it is not in the interest of the government to continually disburse bailout funds to the power Discos without a commensurate improvement in electricity supply.
Experts in the field, he said, should be given an opportunity to invest in the sector, promising that the Senate would continue to support the TCN in its execution of the Transmission Rehabilitation and Expansion Programme (TREP) which is planned to rehabilitate, stabilise and provide the necessary flexibility in the country’s transmission grid.
The statement also quoted Senate Majority Leader, Yahaya Abdullahi, as agreeing on the need to reduce government’s bureaucracy in the power sector, which he believes is key to getting past its challenges, urging the Senate to re-open the 2013 power privatisation exercise, while involving big foreign investors to allow for proper restructuring of the sector.
Investdata welcomes the desire to welcome new investors with the needed competence into the sector as a way of correcting some of the anomalies of the initial exercise and indeed the entire privatization of government assets from the Olusegun Obasanjo government.
Although, the Senators desire that the shares be sold to investors with technical competence, we however believe that the Federal Government should as part of democratizing/redistributing wealth ensure the divestment exercise is done through the Nigerian Stock Exchange (NSE) by way of an offer for sale, even as a portion can be sold to investors with technical competence.
Should the government resolve to sell the DISCOs through the NSE, professional parties to the offer will ensure that the government is not in any way shortchanged in the area of appropriate pricing of these core assets.
Should the government choose to divest its stake through the NSE, it will, among others, ensure proper valuation and market rate for its investments in the company over the years.
Listing of the DISCOs, will not only further diversify and deepen the NSE and ensure that that very important segment of the economy is represented on the bourse.
The move will, therefore, open the operations of the companies to public scrutiny on behalf of the government and ensure international best practice in the area of good corporate governance, rather than the current situation where the companies are operated as some forms of fiefdoms.