A Review of the Nigerian Energy Industry

‎Three banks under probe over N50b in escrow accounts

Central Bank of Nigeria, CBN.
Central Bank of Nigeria, CBN.

Oscarline Onwuemenyi

24 July 2015, Sweetcrude, Abuja – The Presidency has announced that it is probing three banks for short-changing the Federal Government in the management of the N50 billion escrow accounts interest yield for seven Electric Power Generation Companies, EPGC.

The Bureau of Public Enterprises, BPE, and the Nigerian Bulk Electricity Trading Plc, NBET, in 2013 entered into an agreement with three banks to manage the N50 billion.

In a petition by NBET, obtained by our correspondent in Abuja, the organisation said the N50 billion was sourced from the proceeds of the privatisation of Egbin Power Plc. But, contrary to the guidelines of the Central Bank of Nigeria, CBN, the banks have not been paying “the required interest on the escrow accounts.”

The row over the escrow accounts was referred to President Muhammadu Buhari following the loss of over N10 billion interest yielded in the last two years.

The companies include Afam Power Plc; Egbin Power Plc; Geregu Power Plc; Kainji Hydro-Electric Plc; Sapele Power Plc; Shiroro Hydro-Electric Plc; and Ughelli Power Plc.

Each of the generation companies (sellers), pursuant to the provisions of the Electric Power Sector Reform Act No. 6 of 2005, were mandated to take over generation and related businesses of the Power Holding Company of Nigeria (PHCN).

Safety escrow accounts were established to protect the stake of private investors in the seven generation firms.

It was gathered that instead of paying 10 per cent interest on the N50billion as applicable to other funds being managed by NBET, the banks had been remitting only 0.02 per cent interest per annum.

It was also gathered that Clause 7.1 (Compensation) of the agreement that the interest on the escrow accounts be compounded monthly together with the balances in the Escrow Accounts.

The agreement noted that, “The Escrowed Funds in the escrow accounts shall bear interest at such rate as shall be agreed between BPE and the Escrow Agents from time to time (“the
Interest’’). The Interest shall, subject to Clause 7.1 (Compensation), be compounded monthly together with the balances in the escrow accounts pending distribution in accordance with Clause 5 (Distribution of Escrowed Funds) of this Agreement.”

Sequel to the earlier petition, it was learnt NBET’s efforts to persuade the banks to adopt CBN’s guidelines on the escrow accounts have failed in the past one month.

In a letter to the banks, NBET said the interest rate was no longer acceptable.
The letter noted that, “Pursuant to the commencement of TEM, NBET is now poised for an active management of the escrows.

“A myriad of events have altered the fundamentals of the macro economy. The surge in inflation coupled with decisions made by the Monetary Policy Committee of the apex bank(CBN) that included a review of the CRR have necessitated NBET to call for a meeting with the lead escrow bank.

“The meeting will serve as an avenue to review the management of the Escrow and consider strategies to maximise returns on the funds more efficiently.”

It added that, “Further to the meeting held between ourselves and all three escrow banks, while working on amending the Egbin escrow agreement, we wish to request for an increase in interest rate earned on our credit balances

“As discussed, this is in line with market realities, especially with the recent increase in CRR and with a bid to maximise returns on the funds more efficiently.”

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