World Bank chiefs rush to Abuja over fears of Azura’s $100m default

A team of senior World Bank chiefs came to Abuja last week amid rising worries over an impending default on payment of about $100 million to creditors of the 451MW Azura power plant located in Edo State, BusinessDay has learnt.

Azura is meant to collect cash for the power it generates in Nigeria and the Central Bank of Nigeria (CBN) is then expected to provide it with the required foreign exchange to meet its obligation to foreign lenders that funded the construction of the plant that produces over 10 percent of Nigeria’s grid power.

By last week, about $100 million of such payment had yet to be provided for by the CBN and this relates to payment that should have been made to the lenders since last year. Following the visit of the World Bank delegation, our reporter learnt that about $50 million was delivered by the central bank on Monday.

Bankers told BusinessDay they are worried that if this crisis persists, Nigeria could be driven further into pariah state with whom no one wants to do business and it could also freeze new flows into Africa’s biggest economy.

Azura is easily Nigeria’s most reliable power plant and it was built with financing from 16 leading global banks from nine countries and development finance institutions, DFIs representing the USA, UK, France, Holland and the Nordic countries.

The lenders all carry a solid guarantee from the World Bank’s multilateral investment guarantee agency, MIGA which promises to pay the lenders should the sovereign, Nigeria’s government, fail to live up to its obligation.

On 16 November last year, Azura wrote to President Muhammadu Buhari to request his urgent intervention to resolve the problem created by the CBN’s repeated failure to avail the company of the FX it needs to meet its financial obligations to lenders and shareholders.

Following this letter to the President, the CBN made a small attempt to rectify the situation by granting Azura “forward allocations” in the region of $33 million, of which the first $20 million was due on 20 January 2023. But no delivery was made on this date.

Azura’s lenders have now been forced to issue a claim against the World Bank’s Multilateral Investment Guarantee Agency, setting off a major crisis of confidence for Nigeria.

Read also: Nigeria’s central bank’s dollar restrictions endanger Azura Power plant

BusinessDay learnt that Azura wrote to the minister of finance two weeks ago, precisely 17 January 2023 to alert her of the dire consequences of this claim made on MIGA.

This sparked worry at the World Bank which sought frantically to contain the crisis by despatching a senior team led by an executive director from Washington to Abuja to speak with the CBN governor and the minister of finance to explain the huge implications of the mess that is about to hit Nigeria.

It will mean that Nigeria’s credit rating downgrade by Moody’s to its lowest as well the rating action by Standard & Poors could now open the door to a significant loss of confidence for Nigeria which will, in turn, have a chilling effect on credit flows to Nigeria. And it will almost certainly kill off the assistance that the country urgently requires from the IMF. The news will also be all over the international press at precisely the moment when Nigeria is heading into the presidential polls.

Many analysts see the actions of the CBN as truly baffling. According to one analysts, “if it is true that Nigeria has reserves in excess of $34 billon, why is it struggling to pay a mere $100 million? How much of this $34 billion is encumbered and how much is free and clear reserve?,” the London based analyst asked.

According to him, “it is almost as if someone wants to precipitate a massive run on the Naira and trigger a multi-year freeze on inward investment into Nigeria, as a parting gift to the country.”

Read also: The hot air about Azura and the penchant of our leaders to amuse

A crisis resulting from a default on Azura payment could mean taking 415mw from the grid and engineers say if this happens, the grid will automatically collapse, throwing Nigeria into a deeper crisis.

Coupled with the downgrade of almost ten Nigerian banks, an Azura default could freeze credit lines for Nigerian banks and throw the economy into a spin.

When contacted for comments, Edu Okeke, CEO Azura Power, said: “I can’t comment on random allegations or purported communications from sources that are unknown to me.

But what I can tell you is that the CBN is a major stakeholder in the Azura-Edo IPP and has been very supportive of the project all the way from inception to date.

“Indeed it is fair to say that we have received nothing but unwavering support from the country’s apex bank, whose actions have consistently supported investor confidence in our company.”


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