Aside Central Bank of Nigeria (CBN) intervention aimed at dealing with liquidity crisis and legacy debt in the power sector, it will also boost power supply to business owners especially frozen food operators. ADEOLA TUKURU writes.
The term frozen food refers to food items that are exposed, or treated to freezing temperature, so as to preserve them from decadence if there is adequate power supply.
Most common type of frozen food business is trading in the freezing, storage and sales of frozen food items.
Checks by Business Starter revealed that over 80 percent of consumers patronize frozen foods across the country.
Stakeholders insisted that there may be a leeway for the power sector through the escrowing of the accounts by the CBN, stressing that the development may have halted misappropriation of fund by the utility companies, increased power supply, introduced transparency, increase revenue, enable government to recover monies loaned to the companies while reducing the financial burden in the sector.
A frozen food business owner, Madam Esther Etim said the CBN intervention in the power sector will significantly improve power supply to homes and businesses especially for some of them who do it as a means of livelihood.
Another purpose of the escrow account is to enable the CBN recover its monies so that it is not frittered away or used by the DisCos to finance their investment.
Recounting to our correspondent, Etim explained that she started the business to empower herself.
“Actually, I started the frozen foods business just to empower myself financially. I needed a stepping stone to enable me actualise my dream in life after I lost my husband 4 years ago.
In her words, “I was just trying to see what I could do to improve my life after my husband died then I was introduced to my former boss who happened to be my in-law. I worked for her as a shop attendant for about two years, after which she sent me off with about N50,000 to start my own. That was in 2001.
Madam Etim had an idea of what she wanted to do with her life and cash became available. “I used the money to rent a shop and two deep freezers which I purchased at N18,000 per unit. To be honest, it was not easy but I thank God for the encouragement I got from my former boss as it helped me to keep moving and not give up.”
She firmly believes in the saying that whatever has a beginning has an end and so she persevered and it paid off as the business began to yield some profit after few years of struggling as a widow.
“When I started, it wasn’t easy. There was a time I was buying as little as two and a half kilos of fish from somebody to resell, it was that bad. Then I graduated to buying five kilos and then one or two cartons before I began making some profits.
Business challenges
She, however, regretted that sales have dwindled in recent times probably due to the economic situation of the country.
Said he: “Like I mentioned earlier, sales have dropped drastically. Between Christmas and New Year celebrations, we sold about 100 cartons of turkey and chicken. Fish is still very expensive.”
She said the major challenge facing the business is electricity. “The number one problem is electricity. Most times there is power outage and you know that this business thrives on availability of electricity. Sometimes there is power outage for two days at a stretch. And sometimes, we have light for about two to four hours in a day.
“But there is a standby generator which serves us for at least four hours a day because if we run it continuously, we may end up spending all our profit on fuel generator maintenance. What we do is to turn it on from 6.00pm to 10.00pm. That is how we have been sustaining the business.”
Power sector debt
About two years after the escrowing of the accounts of the nation’s eleven distribution companies by the Central Bank of Nigeria (CBN), stakeholders weighed options for the country’s debt laden power sector.
By escrowing the accounts, cash was only allowed to come in but withdrawals were not possible. The fund is there after allocated based on priority.
Loans to the power sector from commercial banks currently stands at about N819.97 billion as at third quarters of 2021, as banks are saying that loans to the sector could increase the cost of risk for these banks.
National Bureau of Statistics had put non-performing loans in the power sector at N33.22 billion at the end of 2020, out of the N1.23 trillion NPLs recorded by banks.
While financial crisis, especially unpaid debt had led to rancorous development at the Abuja Electricity Distribution Company, the Central Bank of Nigeria had reported that combined indebtedness of power firms in the country currently stands at about N820 billion.
Transparency in DisCos’ collections
In October last year, the Presidential Power Sector Working Group said: “Through the collection discipline via CBN there is full visibility to DisCos collections. Collections over the past six months have stabilized at between N57 to N65 billion.”
While some stakeholders are demanding for measure that would compel the DisCos to perform, noting that the account escrowing could only be a temporarily solution, the Presidency said the account escrowing led to increase in the sector revenue by over 100 per cent.
Between July to December 2020, industry statistics showed that electricity market revenue grew by 10.55 per cent to N272.47 billion.
In the same period in 2019, the revenue was N246.46. The development was then linked to imposition of restriction on revenue collection bank accounts of DisCos.
Significant increase
Special Assistant to the President on Infrastructure, Ahmed Zakari said the account escrowing led to a significant increase in the upstream remittance from discos to NBET/TCN.
According to him, these remittances have increased by over 100 per cent which has aided the liquidity flows to enable operations of the generation companies and Transmission Company of Nigeria (TCN).
“The visibility provided by the escrow system has also aided NERC’s regulatory oversight of the DisCos while also providing data which is being used to independently evaluate sector performance and impact of various interventions being embarked on in the sector,” Zakari said.
For Edward Eje, TCN’s escrowing of Disco’s monthly revenue collection is a worthwhile intervention aimed at beefing up revenue accountability.
“By the CBN escrow intervention therefore, it will be difficult for any DisCos to misappropriate their monthly revenue collection, as the CBN’s Special Purpose Vehicles (SPVs), Meristem monitors all the DisCos commercial banks through which every DisCos’ revenue is remitted. This intervention has actually brought about a level of payment discipline in the market,” Eje said.
Eje advised that the CBN intervention could be complemented with the market operator’s instruments, which means that every DisCo must have an updated Bank Guarantee with the MO and Meristem and should timely update the MO of the Disco’s performance, stressing that such move would inform when MO’s enforcement procedure kicks in, as per the market rules.
Former Chairman of NERC, Sam Amadi insisted that the gains in the revenue may remain elusive if it doesn’t translate to improved operations by the DisCos.
Amadi said the gains are in two folds: “whether CBN is getting repayment as and when due. I think through the escrow the CBN can guarantee itself repayment.”
Also, a professor of energy at the University of Lagos, Yemi Oke said escrowing the accounts should have helped the sector address the shocks from exchange rate volatility. “More should be done to ensure that projected objectives were achieved.”