N213bn NEMSF: De-risking power sector to heal declining economy

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(Last Updated On: 2016-05-31)

Nigeria’s failing economic data are evidently a pointer  to the fact that policy makers in the country would need to roll up their sleeves and get to work to save the economy from plunging into recession.
Statistics recently released by the Nigerian National Bureau of Statistics (NBS) showed that the Nigerian economy and Africa’s largest, contracted in the first quarter for the first time since 2004, as oil production slumped and the manufacturing, financial and real estate industries declined.
One of such critical sectors that urgently requires the attention of government to lift the economy from the woods is the power sector.
This is critical because developments around the world have proven that power supply is the most important catalyst for national development. With adequate power,  people are empowered to work from the domestic level and the cottage industries, through the small-scale and medium industries to employment in the large-scale manufacturing complexes.
Unfortunately, over a period of time, Nigerian power sector has dropped abysmally  to such a level that the average Nigerian does not feel the impact of the 2013 privatisation of the power sector,  currently constrained by lack of market reflective tariffs in the distribution sector, gas-to-power challenges exacerbated by vandalism of power assets, circular debt that caused illiquidity in the sector and an unwillingness to grant bank guarantees or open letters of credit (LCs) for the sector due to perceived elevated risks.
That Nigeria with proven gas reserves of 118 trillion standard cubic feet (scf), according to statistics from the Department of Petroleum Resources (DPR), cannot get gas to fire its power plants while equally struggling with less than 4,000 mega watts (MW) remained a national embarrassment.
Nevertheless, there is hope for significant improvement in power supply in the days ahead as the Central Bank of Nigeria (CBN), has stepped in to address the liquidity and funding challenges facing the sector.
The bank had initiated a N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF) as a follow up to commitments it reached with other stakeholders to address debts owed by generating companies to gas supplies.
The loan was given at an interest rate of 10 per cent, with a repayment period of 10 years.
The apex bank believes that renewed funding commitments for Nigeria’s struggling power utilities should help catalyse new capital investments as the sector gradually gets de-risked.
Stakeholders also believe  the development would enhance power generation and in turn create a significant economic boost in the country as power has been proven to be an enabler of other sectors of the economy.
Those who spoke argued that  the ripple effect of an efficient and productive power sector will be felt across all sectors that rely heavily on power including agriculture, manufacturing and information technology.
So far, the CBN has disbursed a total of N120.2 billion to different electricity distribution companies (Discos), power generating companies (Gencos), service providers and gas companies.
The 4th tranche of the disbursement, which is under the N213 billion NEMSF, was made in Lagos recently. The latest disbursement totaling N55.5 billion went to 24 industry participants including three Discos, 14 Gencos, one service provider and six gas companies.
The Governor of CBN, Mr. Godwin Emefiele, while speaking at the disbursement ceremony, which also had the Minister of Power, Works and Housing, Mr. Babatunde Fashola, and other stakeholders in attendance, said, “we want to unlock the potential of the power sector and so this facility is meant to catalyse the power sector. The fund will be used to procure meters and spares they need to improve their business and stem power losses in the grid.”
He urged the firms to utilise the funds to upgrade their infrastructure.
Emefiele listed some of the areas where the funds are to be invested to include plant maintenance, upgrade of transmission and distribution networks, acquisition of transformers and effective metering of consumers.
Emefiele explained that the 4th tranche disbursement marked a major milestone in the effort of the bank, in collaboration with the Federal Government, to achieve a contract based electricity market. The event featured the signing of power purchase agreements by the Nigerian Bulk Electricity Trader (NBET) to signal activation of industry contracts for power generation under a contract based market.
The first disbursement under the NEMSF scheme was effected on February 12, 2015 to different players in the sector. That intervention resulted in the restoration of a total of 905mw of power into the national grid, among other impacts.
Specific reports from Gencos revealed that there was execution of capacity recovery programmes in three hydro power stations including intake under water repair project, overhaul of Unit 4 and compliant metering and supplementary protection at Shiroro Dam; overhaul of 2G6 at Jebba Hydro and rehabilitation of three units at Kainji Dam under permitted utilisations of the facility. A total of 300mw capacity increase was reported as a result of fund utilisation towards rehabilitation of both plants.
The intervention has also enabled the Electricity Distribution Companies (Discos) to provide bank guarantees to the Nigerian Electricity Bulk Trader (NEBT); purchase of over 171,071 units of meters comprising both maximum demand and single phase meters; rehabilitation of over 332kms of 11kv lines and 130km of 0.45kv lines; 70,310 No 500kva transformers procurement; and construction of 34 new distribution substations and acquisition of one mobile injection substation.
In his remarks, the Minister of Power, Works and Housing, Fashola, commended the CBN for its intervention to help resolve the issues in the power sector.
However, he  assured the nation that incremental, steady and eventual uninterrupted power supply is achievable in the country while appealing that it could only happen if the citizenry cooperate with the government by taking ownership of and protecting the various power supply facilities across the country.
Also present at the event were CBN Deputy Governors, Dr. (Mrs.) Sarah Alade and Alhaji Suleiman Barau as well as chief executives of banks. Key players in the Nigeria electricity industry including the Nigerian Electricity Regulatory Commission (NERC), representatives of Discos, Gencos, gas companies and service providers, among many others, who were equally present at the ceremony, affirmed that the disbursement of the fund would lead to efficiency in power generation and distribution.
They agreed that the N213 billion NEMSF would also enable the power firms to speedily deliver on their commitments, noting that with the provision of the loans, Nigerians would begin to see improvement in power supply.

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