How CBN spent N1.5trillion on power sector intervention in seven years

• Stakeholders task industry on results, a prompt repayment plan

Despite prevailing challenges, the Central Bank of Nigeria (CBN), has in the past seven years spent over N1.5 trillion to keep the nation’s power sector from collapse.

Industry players have however noted that as critical as the intervention may be, compelling the industry to achieve projected goals and ensuring proper repayment plan remained sacrosanct.

The interventions include Power and Aviation Intervention Fund (PAIF), hovering at about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) at about N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall intervention as well as a recent N120 billion intervention designed for mass metering among others.

While epileptic electricity supply has been a critical challenge for Africa’s largest country, the Nigerian government in 2013, opted for privatisation with projections that detailed plans for stable electricity supply. But seven years after the move, the state of the sector has remained dismal as most actors fail to deliver on their key performance indicators (KPIs).

The CBN had in its fourth-quarter economic report (4Q’2020) detailed the interventions, which showed dismal repayment. The primary aims of the intervention were to fast-track electric power projects, especially across industrial clusters in the country thereby improving power supply, employment generation, and enhancing the living standard as well as providing leverage for additional private sector investments.

The interventions, in the face of the financial crisis, was also necessitated by the inability of the sector to finance itself as tariff shortfall, regulatory lapses and acute infrastructure impede the growth of the industry.

The CBN had noted that some of the intervention led to the recovery of power generation capacity of about 1,200 megawatts and allowed DisCos to carry out projected capital expenditure through the issuance of letters of credit (LCs) for the purchase of over 704,928 meters; rehabilitation of over 332 kilometres (km) of 11 kilovolt (kV) lines and 130km of 0.45KV lines; 511 transformers purchased and installed and construction of 56 new distribution substations as well as the acquisition of a mobile injection substation.

Industry experts, who noted that the apex bank deserves commendation on the interventions, especially the level of transparency on the initiatives stated that repayment plan remained a critical issue as well as feasible impacts.

Recall that the apex bank had at some point escrowed the accounts of the DisCos, playing the need to repay the loan as a priority, the fourth quarter report of the bank had shown that repayment stood below 30 per cent.

Former Chairman of Nigerian Electricity Regulatory Commission (NERC), Sam Amadi who said the intervention remained critical, noted that the commission remained critical to the success of the financial intervention.

“We are not hearing about all the monies from the regulator and that is worrisome. It is regulatory who should be speaking about funding for the sector because it has the capacity to regulate expenditure and ensure it goes to what is relevant and prudent,” Amadi said.

Speaking specifically on the intervention for metering, Amadi said: “I support the funding for meters but I doubt if it will solve the problem because the Discos will use the fund to largely replace bad meters and control revenue loss. But the rebate of unmetered customers will remain high and undermine any movement to the cost-reflective tariff.”

President, Nigeria Consumer Protection Network, Kunle Olubiyo had noted that given the level of financial liquidity in the sector, support interns of soft loans would provide leeway for the sector.

He noted that the schemes and financial interventions remained lauded but demanded an urgent review, especially with supporting policies that would drive holistic results from the programmes.

An expert with PWC, Habeeb Jaiyeola said, such intervention remained normal across the world especially if the government must catalyse economic development, noting that such a move would help in controlling the cost of borrowing in developing sectors.

According to him, the CBN intervention remains a positive tool for the development of the sector, adding that the payback has to be enforced to ensure the fund remains available for further critical interventions.

While some stakeholders had noted that the apex might need to influence policies in the sector to drive maximum value from the intervention, National President, Association for Public Policy Analysis (APPA), Princewill Okorie noted that the sector might not have taken proper advantage of the apex bank initiative.