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Stakeholders divided as CBN loans to power sector hit N1.5 trillion

By Kingsley Jeremiah, Abuja
08 June 2022   |   4:03 am
Nigeria’s electricity sector, struggling to perform, has gulped over N1.5 trillion in interventions and loans from the Central Bank of Nigeria (CBN).
Godwin Emefiele

Central Bank of Nigeria governor Godwin Emefiele PHOTO: /TWITTER/GOVWIKE

Nigeria’s electricity sector, struggling to perform, has gulped over N1.5 trillion in interventions and loans from the Central Bank of Nigeria (CBN).

The latest being a $250 million (N103b) intervention aimed at ensuring the rehabilitation of critical interfacing infrastructure between transmission and distribution.

According to the Minister of Power, Abubakar Aliyu, the move will increase and stabilise power delivery.

Although stakeholders told The Guardian that it remained critical for the apex bank to help de-risk, limit financial liquidity and save the sector from collapse, they however insisted that it was high time the power sector sustained itself.

Privatized in 2013, the Nigerian electricity sector has failed to live up to initial optimism where the country is expected to be enjoying nothing less than 40, 000 megawatts of electricity. Instead, bottlenecks persist, crippling the sector below 3,000 megawatts, which was the case before privatization.

With liquidity crisis hovering above N4 trillion and indebtedness, which has affected the survival of some commercial banks, the generation companies, transmission as well as the distribution are reportedly gasping to remain in business.

Since it was privatized, CBN had launched the Power and Aviation Intervention Fund (PAIF), hovering at about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) of N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall intervention, N103 billion interface project and a recent N120 billion intervention designed for mass metering, among others. The Federal Government had similarly staked another N701 billion CBN facility in March 2017 as Power Assurance Guarantee.

The companies, especially the distribution companies, often described as the weakest link could not meet up with projected objectives, particularly the Key Performance Indicators (KPI), which included metering of consumers.

CBN Governor, Godwin Emefiele, last month, admitted that the bank had disbursed over N1.3 trillion to support power supply to Nigerians in the last five years.

Speaking at a news conference following a meeting of the Bankers Committee in Abuja, Emefiele said: “So, what we are trying to say here is that the CBN has always been there to support the power sector. Like you all know, we have disbursed over N1.3 trillion in the last five years to support through the Generators or Discos or to acquire equipment or to buy meters or to improve what is being paid to electricity generating companies; so that they can continue to pay for their gas and then the system can continue to operate.’’

Principal Partner, Nextier, Emeka Okpukpara told The Guardian that discontinuing current intervention by the apex bank in the sector should not be an option.

According to him, for the government to play its role, especially the provision of an enabling environment for the economy and job creation, the power sector needs to be running and sustained.

“It is important for power to function so that the government can create jobs and keep other sectors of the economy running. The interventions are critical to this and it should continue,” Okpukpara said.

Okpukpara however called for the need to properly track the funding, stressing that there was need for independent monitoring to ensure that the country avoids waste of national resources.

While the apex bank had escrowed the accounts of the power sector, Okpukpara admitted that such a move would help the government recover funds loaned to the sector.

Associate Director, Energy, Utilities and Resources at PricewaterhouseCoopers, Habeeb Jaiyeola, has repeatedly insisted that providing financial support to industries, especially the power sector, remained a welcome development.

Although, Jaiyeola noted the need to ensure that the facilities are duly paid back, he said government’s continued support to power sector will have an overall impact on the sector to facilitate the required progress, adding that the Federal Government also has equity ownership in the DisCos.

He urged the authorities to clearly outline and monitor the interventions to ensure it achieved projected objectives, adding that the National Mass Metering Programme for instance, may need to be checked against some of its set objectives in terms of coverage, availability, and completion time.

“An assessment of the impact of intervention funding in the power sector also needs to be looked into. While government intervention continues to be an important sector catalyst, monitoring impact will ensure government’s scarce resources are appropriately channelled for the benefit of Nigerians,” he said.

According to him, infrastructure funds are used globally for the development of critical infrastructure that guarantees constant returns on investment for investors, adding that a critical element of the success of these funds is adequate planning and strategic contracting.

“The world over, government interventions are used to catalyse economic development. In many cases government interventions are quite critical in controlling the cost of borrowing in developing sectors. The CBN intervention remains a positive tool for the development of the domestic gas sector. However, the payback has to be enforced to ensure the fund remains available for further critical interventions,” Jaiyeola said.

He stated that to achieve sustainable growth, interventions alone cannot be the solution, adding that an appropriate pricing system needs to be instituted to enable the forces of demand and supply determine price and enable adequate returns on investment.

Giving details of some of the goals achieved through some of the interventions, CBN noted that reports from Generating Companies revealed that there was execution of capacity recovery programmes in three hydro power stations including Intake under water repair project, overhaul of Unit 4 and compliant metering and 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.

CBN had equally noted that a total of 300MW capacity increase was reported as a result of fund utilization towards rehabilitation of both plants, adding that others were rehabilitation of seven gas turbines at three major thermal Power Plants namely Geregu, Transcorp Ughelli, and Ibom Power Plants.

Former Chairman of NERC, Sam Amadi had noted that the CBN intervention remained a special funding to deal with liquidity crisis and legacy debt in the sector, adding that it would be repaid but through a convenient process that would not adversely affect the sector’s investment plans.

“The gains of the fund are twofold: whether CBN is getting repayment as and when due, I think through the escrow the CBN can guarantee itself repayment. But the bigger issue is whether the fund has improved the operations of the discos,” he stated.

An energy expert, Oyebode Fadipe, had said, one of the fundamental issues in the power sector was poor liquidity, adding that while it is true that one of the expectations of the privatisation programme is that the sector would be self-funding so that government would ultimately stop funding it, the benchmark had not been realised.

“It is in direct response to this liquidity challenge that the CBN was brought into the loop. There is therefore sense in the involvement of the CBN in the interface projects between Disco and TCN,” Fadipe said.

He stated that the action of the apex bank would help to bring more stability in the grid and by so doing; more people will be able to receive electricity for their use.

Fadipe stated that quality of supply is also expected to increase because in some locations where the transformers are overloaded, they would be upgraded.

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