A code of corporate governance for Nigeria’s electricity industry is imperative

There is no doubt that the privatization of the power sector is a desirable one and the government should be commended for its efforts so far. Consequently, the generation companies (Gencos) and distribution companies (Discos) have swung into action, battling with the teething challenges of obsolete infrastructure and so on.

But, unfortunately, Discos, which are supposed to be closer and responsive to the consumers, have fallen short of expectations of the public as the promoters have rather concentrated on fending for themselves and behaving as if there are no rules governing their operations. Since the takeover of operations by the private owners of the Discos and Gencos over 10 months ago, some have performed creditably well, while others have exhibited sheer impunity. 

Agreed that they are being confronted with some challenges, such as shortage of gas, which is not within their ambit, hostile staff and some legacy issues. How about their engagement with consumers? Do they promptly attend to their needs rather than offering apologies for their shortcomings? The Discos, particularly, have not shown any commitment to the issue of rolling out pre-paid meters which enhances billing and revenue collection. Instead they seem engrossed with fixed charges and estimated billings. 

It is on record that some Discos are engaged in plain banditry. Some of them spend millions of dollars on frivolities ranging from purchase of expensive cars and jeeps, paying bogus housing allowances, to the appointment of board members who incidentally are their family members without any relevant expertise. For instance, there is no arms length relationship between independent directors. Independent directors normally head remuneration and audit committees; audit committees are an internal audit mechanism that ensures financial regulatory and risk management compliance of companies. 

This regrettable anomaly is against the provisions of the companies and Allied Matters Act as amended, which states that the members of the committee should be independent. But, it has been flouted due to inadequate supervision. In Nigeria’s code of corporate governance, remuneration of executive directors should be set by the remuneration committee which comprises all, or most of the non-executive directors, but in most cases the committee is sidelined since they are family members.

Allowing the Discos to continue feeding fat from the monthly crazy bills and looking unto CBN as the ‘big brother’ in the event of crisis, is unacceptable. Therefore, the current move by the Nigerian Electricity Regulation Commission (NERC) to impose a corporate governance code for all acquirers of privatised power assets should be commended. However, we urge NERC to expedite action on the corporate governance code as the continued perpetuation of these unscrupulous acts will make it impossible for the nation to enjoy the benefits of the privatization exercise.

 The financial scandal of 1990 that ruined a lot of banks combined with the 2009 financial crisis buttress the urgent need for a sustainable code that will prevent a repeat of the same problem in the power sector. Allowing corporate governance issues to fester in the power sector will result in the inevitable closure of these firms due to bankruptcy and funds mismanagement. 

Discos (and Gencos for now), are in essence, monopolies in the area they provide power. We should learn a lesson from the Georgian experience where the new owners of the Discos went bankrupt because prepaid meters were not deployed and there was no close supervision and monitoring.