CBN dangles fresh N93b in power sector intervention

Operators want more disbursements

With N120 billion already disbursed to power sector operators by the Central Bank of Nigeria (CBN) as part of its Development Finance intervention, there are about N93 billion more waiting for the appropriate time and tranche structure.

The intervention tagged Nigerian Electricity Market Stabilisation Facility (NEMSF), was scripted to support operators to the tune of N213 billion in 2014, by CBN, in conjunction with the Bankers Committee- a forum of all the chief executives of banks in Nigeria, headed by serving apex bank governor.

Besides, the intervention is also a follow up to commitments it reached with stakeholders, particularly the Bankers Committee, to address debts owed by generating companies to gas suppliers.

Already, a breakdown of CBN’s interventions programmes showed that the Real Sector Support Facility (RSSF) received N300 billion; the Micro-Small and Medium Enterprises Development Fund (MSMEDF) got N220 billion; the Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) got N75 billion; and the Nigeria Electricity Market Stabilization Fund received N213 billion.

Others include the Nigeria Export-Import Bank (NEXIM) support at N50 billion for the Export Refinancing and Restructuring Facility; and the Non-oil Export Stimulation Facility that received N500 billion.

CBN Governor, Godwin Emefiele, said the fourth disbursement of the intervention fund marked a major milestone in the effort of the bank, in collaboration with the Federal Government to achieve a contract based electricity market in the country.

At the event, a fresh lifeline came the way of electricity Distribution Companies (Discos), Generation Companies (Gencos) and gas providers, as CBN disbursed N55.46 billion to the operators.

The development marked the resumption of the development financing scheme by CBN for the sector, which was suspended as a result of costs and pricing issues among Discos, Gencos and gas providers.

Meanwhile, the operators have expressed gratitude for the support and concern of government over their financial inability that has challenged their operational efficiency, but asked for increased disbursement.

A source close to the Niger Delta Power Holding Company Limited told The Guardian that the company got less than N9 billion, while it was looking for N23 billion to smoothen operations and maintain its multiple power stations.

The source said the company has about six or seven power plants, amid gas supply challenges, which its price has remained an issue; sizeable workforce under its employ; recurring insurance payment; and power sector tariff that is impacting on revenue.

While commending the efforts aimed at assisting the sector operators, the source said it would have been better had the tranche been bigger, such that allocations could increase, but hoped that subsequent one would come soon, as well as raised up.

Also at the event, the Power Purchase Agreement (PPA) Activation by Nigerian Bulk Electricity Trading Plc (NBET) was signed to signal activation of industry contracts for power generation under a Contract Based Market.

However, Emefiele noted that one year into the progamme as at February 2016, N64 billion or 30 per cent of the facility earmarked has been disbursed to 18 participants- five distribution companies (N41.06 billion); seven generating companies (N18.46 billion); and six gas companies (N5.24 billion).

These companies committed to using the funds to upgrade/refurbish their equipment and acquire new ones so as to improve service delivery.

The facility was given at 10% interest rate and repayment has commenced.

The latest intervention, which brings total disbursement to N120.2 billion, include 24 industry participants- three Discos; 14 Gencos, NIPP inclusive; one service provider; and six gas companies to further address the challenges of the sector.

New entrants into the scheme are two Discos- Benin and Jos; and eight generating companies that include two IPPs- Agip/Okpai and Shell; and six NIPP plants-Alaoji, Geregu, Ihovbor, Olorunsogo II, Omotosho II and Sapele II.

A further breakdown of the disbursement a showed that total disbursements to date to Discos will now become N49.73 billion; Gencos, N54.29 billion; gas companies N15.73 billion; and service providers, N0.46 billion.

“Our review of the fund utilization and reports of impact by beneficiaries revealed that the intervention resulted in the restoration of a total of 905MW of power into the grid as a result of facility turn around maintenance, contribution of over 25 per cent of the annual capital expenditure budget for the sector.

“Specific reports from Gencos revealed that there was execution of capacity recovery programs in three hydro power stations- Intake under water repair project, overhaul of Unit IV, and compliant metering/supplementary protection at shiroro dam; overhaul of 2G6 at Jebba Hydro and rehabilitation of three units at kainji Dam under permitted utilizations of the facility.

“A total of 300MW capacity increase was reported as a result of fund utilization towards rehabilitation of both plants. Others were Rehabilitation of seven gas turbines at three major thermal power plants- Geregu, Transcorp Ughelli, and Ibom Power Plants,” Emefiele said.

He added that the intervention has also enabled Discos to provide bank guarantees to Nigerian Electricity Bulk Trader (NEBT), purchase of over 171,071 units of meters comprising both maximum demand and single-phase meters.

It also helped in the rehabilitation of over 332kms of 11KV lines and 130km of 0.45KV lines; 70,310 No 500 KVA transformers procurement and construction of 34 new distribution substations and acquisition of 1 mobile injection substation under confirmed permitted utilisation by the initiative.

The direct development intervention of CBN in the nation’s real sector was estimated at about N1.4 trillion, by February 2016, which at various times was accompanied by sustained credit stimulation efforts to enthrone a regime of “reasonable rates” in banks and for the good of small businesses.

The bank noted that the country has no choice now than to support real sector activities, as oil economy has crashed, reiterating that beside the primary roles of monetary, price and financial stabilities, the challenging economic issues globally have necessitated the adoption of developmental angle in regulating the system by emerging and developed economies, which it has also keyed into.

Of course, the Federal Reserve Bank of the United States and Bank of England have at various times directly intervened in boosting the fortunes their economies by injecting funds, subsidising rates and promoting the growth of different sectors.

For Emefiele, the far-reaching objectives of CBN’s implementation of the schemes and programmes for real sector was on the back of inherent potentials like huge employment capabilities, high growth opportunities, significant accretion to foreign reserves, expansion of the industrial base and apparent diversification of the national economy.

“The real sector as you know, is the engine of every economy, as it facilitates the production of raw materials, which add value to the domestic economy and consequently serves as a source of wealth creation and income generation to the productive population, the real sector also provides effective linkages among crucial sub-sectors such as agriculture, manufacturing, power, financial services among others,” he said.