Power essential to unlock economic potentials – CBN Governor

Godwin Emefiele, CBN GovernorOSCARLINE ONWUEMENYI 17 August 2014, Sweetcrude, Abuja – The Central Bank of Nigeria, CBN, would be paying off about N25 billion owed by power generating companies to gas producers in the country in order to remove the air of uncertainty in the sector and ensure gas is supplied to keep the economy thriving, the CBN’s new governor, Mr. Godwin Emefiele, has promised.

He said the Bank had always sought ways of supporting the power sector, describing the sector as “very essential to unlocking the economic potentials of the country”.

Emefiele, who said CBN’s payment of the outstanding debts will serve as a guarantee to suppliers and give the ailing sector a needed boost, described the action of the Bank as “sowing some seed” and “providing a form of intervention at concessionary prices to support the endeavour to provide power to Nigerians and help in growing the economy.”

Speaking at a press briefing organised by the apex bank in collaboration with the Ministry of Petroleum Resources, Ministry of Power, the Nigerian National Petroleum Corporation, NNPC, and the Nigerian Electricity Regulatory Commission, NERC, in Abuja, Emefiele noted that to give confidence to stakeholders in the gas sector regarding the willingness of the power sector to settle its outstanding debts for gas, the Central Bank will support initiatives to clear up the most recent gas-related debts of the power sector.

“Specifically, the CBN is looking at banking sector-led measures to pay off N25 billion of debts owed to gas suppliers. This will be subject to reconciliation efforts and adequate provision for this support in a revised MYTO (Multi-Year Tariff Order) that ensures repayment within five years.

“The Central Bank will also play a key role in financial arrangements that guarantee payment for gas supply by the power sector,” he revealed.

Emefiele maintained that the Bankers’ Committee, BC, has called for more actions towards the sector at its recent meetings, and that this led to the CBN governor being asked to continue engagement with the Ministries of Petroleum Resources and Power.

“Our interactions with stakeholders revealed that there are some outstanding legacy debts of about N25 billion, and we thought that as a financial catalyst in this process, we should give support by ensuring that the existing gas suppliers are given confidence by paying off these outstanding debts” he added.

According to him, the CBN as well as the deposit money banks will “seek ways to set up an SPV through which this debt of N25 billion will be paid to gas suppliers, and thereby give them the confidence to continue to produce gas which is badly needed to power the generating plants.

The CBN governor further stated: “Power is very essential to unlock the potentials of the Nigerian economy, and to do so we felt that it is important for us to begin to learn about the issues that are militating against the adequate supply of power for the economy to thrive.

“This is why we are engaging in this collaboration with the two ministries of government directly responsible, as well as with NERC and the NNPC, to ascertain areas we can come in to ease the bottlenecks and give the sector a shot in the arm”.

He further noted: “We have found out that investors that would have liked to come into the sector have been queasy about the gas pricing modalities; many of them believe that the price of gas is not competitive enough as per what obtains elsewhere in the world. This is the reason we have decided to intervene in such a manner.

“We are hoping that with the adjustment in the gas pricing, it will make the sector more competitive for existing and potential producers, and of course, the banks will be more than ready to come in and act as financial catalysts, which is part of their obligation to growing the national economy”.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke recently stated that in addition to the review in the price of gas and debts payment by the CBN, the Federal Government is focusing on a number of gas supply projects that would cushion the effect of supply shortage.

“These projects which are at various stages of maturation, but which will be concluded before the end of the year, should unlock additional 370mmcf/d assuring us of a total of 5,000MW (inclusive of hydro) within the next five months,” she said.

About the Author