A Review of the Nigerian Energy Industry

NBET releases $350m eurobond allocation for sovereign investment

Chinedu Nebo
Prof. Chinedu Nebo, Minister of Power

Kunle Kalejaye

24 July 2014, Sweetcrude, Lagos – The Nigerian Bulk Electricity Trading Company, NBET, has released its entire $350 million allocation from Nigeria’s $1 billion Eurobond issue to the Nigerian Sovereign Investment Agency, NSIA, to manage for profit.

This followed a funds management agreement signed, Wednesday by the two government agencies under the watchful eyes of the Finance Minister, Dr. Ngozi Okonjo-Iweala, at NBET’s Corporate Headquarters in Abuja.

According to the NBET Chief Executive Officer, Mr. Rumundaka Wonodi, in a statement obtained by Sweetcrude Reports,  the agreement frees his agency to focus on its core mandate to develop the electricity market while at the same time ensuring that the agency’s funds are earning interest that will help to defray the cost of the funds while it remains available.

NSIA manages the Nigerian Sovereign Wealth Fund, initially conceived as an investment management vehicle for the excess of budgeted crude oil revenues for Nigeria.

Its Chief Executive, Mr. Uche Orji said at the signing ceremony that NSIA will bring its proven capabilities in profitable asset management to bear for the benefit of NBET and the power sector in general.

Nigeria issued the $1 billion Eurobond on the 2nd of July last year.

The Coordinating Minister for the Economy and Honourable Minister of Finance, Dr (Mrs.) Ngozi Iweala, led the drive through the Debt Management Office (DMO) and was quoted by Reuters as saying that the money would be spend on infrastructure and that the success of the coupon “shows confidence in the Nigerian economy.

The $1 billion Eurobond was issued specifically for financing power projects including gas to power transportation, transmission rehabilitation and to increase NBET’s capitalization as a credit worthy off-taker.

Dr. Okonjo-Iweala has also announced on Monday 10 February 2014 at the Nigeria Power Sector Investors’ Conference that NBET’s $350 million liquidity facility will be given to NSIA to earn interest for the Bulk Trader which can be used to offset some of the interest payments until such a time when NBET will require the funds.

She explained at another event that even though the Eurobond money was taken to support the power sector, the loan “has to be managed in such a way that we are also able to repay it.

“So you need to think about the best way to invest this money. You can’t just have it sitting in the Central Bank, which was what we were doing initially, because it will earn next to nothing.

“So the best opportunity was to give it to the premier investment corporation of the government to manage it so that we can get some decent returns that will enable us to defray the interest cost of the repayment of the facility, even if it’s not all, at least it will be more than it will get sitting elsewhere.”

In addition to Dr. Okonjo-Iweala and Minister of Power, Prof. Chinedu Nebo, who supervised the signing ceremony, and other key government functionaries who witnessed the event include the Director General of the Bureau of Public Enterprises (BPE), Mr. Benjamin Ezra Dikki, and Dr. Abraham Nwankwo, the Director General of the Debt Management Office (DMO).

Although operating under the supervision of the Federal Ministry of Power, NBET’s shares are held jointly by the BPE (80%) and the Ministry of Finance Incorporated (20%). The DMO issued the Eurobond on behalf of the Federal Government of Nigeria.

NBET also known as the Bulk Trader was incorporated on July 29 2010 as the Special Purpose Vehicle (SPV) to “engage in the purchase and resale of electric power and ancillary services from independent power producers and from the successor generation companies”. 

Successive manager of the power sector reform have always pushed for NBET to have a robust capitalization that provides comfort to investors that it is able to bear sovereign risks as well as assure prompt payment for power supplied by the generating companies (GENCOs) and independent power producers (IPPs) to the national grid.

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