Six electricity distribution companies have filed for force majeure over Central Bank of Nigeria’s decision that all revenues should be ring-fenced by the banks.
The Discos are those of Benin, Port Harcourt, Kaduna, Kano, Abuja and Ibadan.
It was gathered that the Discos became aggrieved with the CBN over the decision and have written to the Bureau of Public Enterprises that the agreements under which they bought majority stakes in the entities have been broken.
By declaring a dispute, the Discos may return their stakes to the government and demand a refund of their payments when they took over 60 percent shares in the 2013 privatisation exercise.
They may also get compensations.
According to Wikipedia, force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.
Last month, the CBN asked banks to take over the responsibility of collecting electricity bills from the Discos, saying that would improve payment discipline in the industry.
But most of the Discos, it was learnt, are indebted to the banks with their loans classified as nonperforming
The Discos have been defaulting in paying the remittance threshold to the Nigeria Bulk Electricity Trading for the invoice of energy received.
In May, the Discos had approached a court to stop the Federal Government from conducting a forensic audit of their operations.
The recent approval for increase in tariff, it was gathered, was to reduce government financial intervention in the sector.
Federal Government has provided over a trillion naira facility for the payment assurance guarantee to resolve liquidity problems in the sector.