CBN Directs Banks to Take Over Electricity Bill Payment Collection from DisCos

CBN Directs Banks to Take Over Electricity Bill Payment Collection from DisCos

The Central Bank of Nigeria (CBN) has issued a directive to banks to collect electricity bill payments.

In a circular dated August 21, Bello Hassan, CBN’s director of banking supervision, said taking over from electricity distribution companies will improve transparency in the power sector.

“The payment or settlement of all NESI related goods or services shall be made through the Nigerian banking system,” the circular stated.

“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 a 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.

“Therefore, the DMB 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.”

The apex bank also directed that banks providing bank guarantees to Nigeria Bulk Electricity Trading (NBET) Plc and the Transmission Company of Nigeria (TCN) on behalf of DisCos, would take full responsibility for the collections and the remittances of the DisCos to both NBET and TCN.

“For the avoidance of doubt, no DMB is permitted to open or continue to maintain a collection account for a DisCo without the express no-objection of the DMB that guaranteed its exposure to NBET or TCN,” it said.

The Cable reported that in the latest quarterly report of the Nigerian Electricity Regulatory Commission (NERC), the collection efficiency by the DisCos is low and has continued to adversely impact the financial liquidity of the industry.

Revenue generation is one of the major challenges of the power sector. DisCos keep lamenting over revenue shortfalls attributed to low electricity tariff. But this new directive from the CBN is suggesting that electricity revenue has been going into the wrong accounts.

However, Nigerians are concerned that the directive is coming from the Apex bank instead of the National Electricity Regulatory Commission (NERC). Given that the DisCos are privately owned companies, many are questioning the right the central bank has to direct them on how to receive electricity bill payment.

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16 thoughts on “CBN Directs Banks to Take Over Electricity Bill Payment Collection from DisCos

  1. Maybe we start by making our courts functional here, because a lot of nonsense pass here as policies or directives. And if there’s no blowback, one day the Police might announce that you need a police permit in order to visit your grandma, under the public health protocols! Yes, police for health protocols, that’s the sort of thing the CBN just did with energy companies.

    How agencies of government derive their inherent power to magically enter any sector and make some big calls, you struggle to draw the relationships. That DisCos couldn’t collect enough revenues, then the CBN needed to intervene! This level of dysfunctional system we run here is dizzying and repugnant; the incompetence is palpable all round.

    Nigeria keeps behaving like that dad (or mum) who never believes that their son or daughter has grown up, and therefore must be managed and instructed at every turn; very nauseating sight to witness.

    The CBN could as well mandate banks to have 10% equity in all the DisCos, since both destinies are now tied together. And rather than seeing DisCo guys in your area, you can now have bank officials coming to ask for your energy bill.

    This jungle called Nigeria needs serious help, the managers have lost their minds.

    Reply
    1. Totally agree with you. But there’s more to the Nigerian situation than the incompetence of the DisCos. I feel there’s the bigger problem of identity that many Nigerians suffer. Who is bold enough to challenge this anomaly for the common good despite the odds of the system fighting back?

      Reply
  2. Prepaid meter is the way. Fix prepaid meters for all consumers and reduce the low revenue rate. Nigerians pay for DSTV and mobile providers as they are using them. I wonder why its difficult to essentially implement the prepaid meter across the nation.
    I think the Discos have a share in their plight because of corruption inherent in the collection of bills.
    Prepaid meter is the way out. My thought.

    Reply
    1. This seems to be the stepping stone the apex bank can use to maintain sanity in that sector. The apex bank can instruct the commercial banks collecting this revenue to finance the importation of prepaid meters for each household at a reasonable cost and amortise it over a period of time. With this the insufficieny of the meter will be cleared.

      Reply
      1. The apex bank is right. Enough of the gamble. Let electric bill be paid to a Single Treasury Account (TSA) as would be accepted by the apex bank and let the importation of prepaid meters be supervised also by the apex bank. Disco has over enjoyed the estimated bill operation.

        Reply
  3. This posture of the apex bank positioning itself as the messiah and sherif of all sectors of the economy is pathetic and may lead to greater frictions down the road. Why not allow market forces to determine which Disco gets capital allocation from capital providers and allow the market to discipline poorly performing discos. But again, I remember we do not even have efficient courts or bankruptcy system where capital allocators can even resort to in the event that a Disco is performing clearly and capital providers need to assert their rights. So at the end, the NESI is a big jumbo-Combo: Discos are private companies or paper but extensions of government agency, hence, the government continues to perpetually bankroll them with tax payers funds whether or not they are performing poorly financially and otherwise.

    Reply
  4. This directive will only aggravate the liquidity challenge in the sector. The truth is that Discos have to literally move from house to house or company to company to force most post paid customers to pay their bills on monthly basis through a scheme known as cash drive. Now that the bills are supposed to be paid directly to the banks, what will motivate such customers to go and pay their monthly bills?

    Agreed that there is systemic corruption and fraud in the industry, the remedy to me is for government in addition to the new CBN directive, is to compel each Disco to Significantly invest in network expansion and reliability, smart metering of their customers and the scada monitoring system if the intent is to improve transparency and accountability in the sector.

    Reply

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