23 December 2014, Lagos -The Central Bank of Nigeria on Monday said that the N213bn Nigerian Electricity Market Stabilisation Facility, meant to resolve liquidity challenges in the power supply industry, would be disbursed to the beneficiaries by Deposit Money Banks from the first week of January 2015.
The CBN Governor, Mr. Godwin Emefiele, disclosed this during the signing of a Memorandum of Understanding between the central bank, participating DMBs and the Nigerian Electricity Regulatory Commission.
Speaking at the event, which was held at the CBN headquarters in Abuja, Emefiele described the move as a bold step that would enable the banks to channel the funds towards de-risking the value chain in the electricity supply market.
He said the CBN, working with the Bankers’ Committee, had long identified that the unattractive pricing of domestic gas and anomalies in the tariff regime were some of the major challenges facing the power sector.
The facility, according to him, will kick-start the electricity market in a way that will ensure improvement in the power sector.
Emefiele said, “We are taking this bold step to now get the banks’ who are themselves channels through which these funds would be paid to the distribution companies and generation companies, and gas suppliers to come in and also sign their MoU at the CBN with the NERC and the CBN.
“This is clearly a bold step and it demonstrates the banking sector’s commitment to supporting government’s commitment in resolving the power problems in the country.
“We have identified that gas supply to the generation companies was a problem and am happy that we took this as a challenge.”
He said with the facility, all was now set for the review of the gas price to about $3:30 per millions of British Thermal Units, adding that the new price would not in any way lead to an increase in domestic consumption of electricity.
The current price of gas being used in the power sector is $1.5 per mbtu.
The CBN boss said, “In the course of our discussion, we found two major problems. One is that the tariff needed to be reviewed; that decision was taken and the gas tariff was reviewed to $2.50, whereas transportation was increased to 80 cents; so, increasing the gas price to about $3:30, which the existing the gas suppliers themselves committed to us that the price is commercially viable.
“The issue of the tariff is something we have looked at and we have decided about a number of options, but I want to assure everybody that there will not be any review of tariff that will unduly affect Nigerians to the point that they won’t be able to pay.”
With the CBN-led intervention, Emefiele said the legacy debt of about N36.9bn owed gas suppliers by the defunct Power Holding Company of Nigeria was now being settled.
The governor expressed optimism that with the settlement of the debt, the entire value chain had become clear, thus making the sector become commercially viable for both existing and new investors to do business.
Amadi, who also spoke at the event, said the facility would help to ensure that the power sector was viable and reliable.
He said with the signing of the pact, the commission would approve the new gas price, which he noted, would become effective on Tuesday.
He said, “We have our own commitment, which is basically to ensure cost recovery both for the CBN and for the other investors who may want to invest either in the upstream or downstream sector. Clearly, this facility will go a long way to ensure that while we continue to ensure that the tariff is cost-reflective, it will not cause a burden on consumer.
“And so, for the avoidance of doubt, with this facility, there will not be any increase in tariff for residential consumers for six months until we begin to see improvements.
“We expect that with more gas coming into the power plants because of this facility and other interventions, in the next three or four months, there will be an increase in capacity; there will be more reliability and the metering plan that is ongoing; we will begin to see that consumers will be much more comfortable with increases in tariff.”
– The Punch