Power sector intervention: CBN, banks sign agreement on disbursement of funds

23 December 2014, Lagos – The Central Bank of Nigeria (CBN) and the Nigerian Electricity Regulatory Commission (NERC) on Monday further signed terms and conditions, as well as participation agreements with all the deposit money banks (DMBs) in the country to commence the disbursement of the N213 billion power sector intervention faculty.

The signing is sequel to the apex bank’s earlier agreement with players in the power sector towards boosting the capacity in the sector as well as stimulating economic development in the country.

CBN headquarters.

CBN headquarters.

It came as NERC also said the proposed new electricity tariff which would formally take effect today would not apply to residential consumers for the next six months as a result of the CBN intervention.

Although all the DMBs are expected to take part in the disbursement exercise, only 14 of them were present in the signing ceremony.

Speaking at the ceremony in Abuja, CBN Governor, Mr. Godwin Emefiele, said: “We are taking this bold step at this stage to get the banks who are to act as channels through which these funds would be paid to the distribution and generation companies as well as gas suppliers to come in to also sign their MoU with NERC as well as the CBN.”

According to Emefiele,“This is clearly a bold step and demonstrates the banking sector’s commitment towards supporting government’s commitment in resolving the power problems that we have in the country. I must commend the Nigerian banks for having done an excellent job up to the time, having taken a bold step to fund the Gencos and Discos last year in their assets acquisition project.

“I am aware that Nigerian banks are predominantly the creditors in the books of these institutions. This further demonstrates the comment of the banking industry to continue to support the growth of the power sector in Nigeria.”

While expressing joy that issues bordering on legacy debts which had greatly limited the progress of the power sector had mow been resolved to give way to improved electricity generation, Emefiele said issues on tariff had also been discussed to ensure that Nigerians are fairly protected from undue exploitation.
He said: “I want assure that there will not be any review of tariff that will unduly affect Nigerians to the point where they won’t be able to pay.”

He said: “What we are doing here today is to say now we are a a point where the Nigerian deposit money banks (DMBs) as well as the CBN are now ready to work together to disburse to clear the legacy debts and as we clear these debts, the entire chain becomes cleared and the business becomes commercially viable for existing investors to continue to do their business and for new investors who are interested in coming into this industry and boost our power and gas sector in Nigeria.”

He added: “I am pretty much optimistic that this would also encourage Nigerian banks to continue to give support because by clearing these debts naturally, and as the tariffs become commercially viable, the debts they are carrying and portfolios would be paid off and they can continue to d a lot more business.”

The Chairman of NERC, Dr. Sam Amadi, said the objective of the facility and support was to ensure that the power sector was viable and reliable.

He stressed NERC’s commitment to ensuring cost recovery both for the CBN and other investors in the upstream and downstream of the sector.

He said the facility would go a long way to help ensure that “while we continue to ensure that the tariff is cost reflective, it would not constitute a burden on consumers immediately.”

He added: “For the avoidance of doubt, with this facility there would be no increase in tariff for residential consumers for at least six months until we begin to see improvement. We expect that with more gas coming to the power plants, because of this facility and other interventions, in the next two, three, four months, there would be increase in capacity, more reliability, and the metering plan that is ongoing would be able to ensure that consumers are much more comfortable to witness any increase.”

Amadi said the newly approved tariff “would come into effect tomorrow and it allows for full recovery and ensures that there’s no risk that is not going to be fully covers with this transaction.”

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