The Central Bank of Nigeria may have in the past seven years pumped in over N1.5 trillion to keep the nation’s power sector from collapse.
The interventions, which are part of over 23 others, valued at above N4.23 trillion were expected to address critical economic issues and spur job creation.
Industry players have however noted that as critical as the intervention may be, compelling the industry to achieve projected goals and ensuring proper repayment plan remained sacrosanct.
The fourth-quarter economic report (4Q’2020) of CBN which contained details of the intervention and the level of loan repayment revealed that the primary aims of the intervention were to fast-track electric power projects, especially across industrial clusters in the country thereby improving power supply, employment generation, and enhance the living standard and provide leverage for additional private sector investments in the power.
The interventions include, Power and Aviation Intervention Fund (PAIF), hovering at about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF), standing at about N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall intervention as well as a recent N120 billion interventions designed for mass metering among others.
The interventions coming in the face of financial crisis was also necessitated by the inability of the sector to finance itself as tariff shortfall, regulatory lapses and acute infrastructure impede the growth of the industry.
Industry experts, who noted that the apex bank deserves commendation on the interventions, especially the level of transparency on the initiatives stated that repayment plan remained a critical issue as well as feasible impacts.
Recall that the apex bank had at some point escrowed the accounts of the DisCos, playing the need to repay the loan as priority, the fourth quarter report of the bank had shown that repayment stood below 30 per cent.
Experts at Templar Law had noted that while CBN is not a sector regulator, in view of its exposure to the sector through its various interventions it was critical for the apex bank to influence policies that would address the general market imbalance as only a viable market will ensure the recovery of its funds and preclude the need for any future interventions.
According to the experts, whilst some of these policies may be outside the CBN’s regulatory purview, there are some policies that are within the domain of the CBN that would have direct impact on the power sector market imbalance and liquidity challenges.
The experts, in a document authored by the legal firm’s Partner, Dayo Okusami and Senior Associate, Moses Pila said: “Gas prices and other elements of the capex for the sector participants are dollar-denominated. With the electricity tariffs in Naira, there is a perennial mismatch between revenue earnings and the capex inputs.”
According to them, while the exchange rate in the tariff is usually fixed, the fluctuations in the general foreign exchange market makes it challenging for the players in the sector to procure foreign exchange at the rate stated in the tariff.
They advised that the CBN may opt to either provide further capitalisation to NBET or some form of payment support to enable NBET to adequately meet its payment obligations under its power purchase agreements.
“This will in turn enable the generation companies to meet their payment obligations to their gas suppliers. The CBN may also choose to provide a special foreign exchange dispensation to the power sector to mitigate the challenges.
“Another area that the CBN could actively influence is the area of collection leakages at the DisCo level. Even where NBET has not been able to exert the required influence on the remittance level of the DisCos, the CBN can use its influence in the banking sector to act. For example, because every DisCo is guaranteed by a commercial bank, the CBN can exert regulatory influence over the conduct of the commercial banks regarding the DisCos’ revenues and ensure the sanctity of collections and the priority of the remittances to the electricity market,” the duo said.
President, Nigeria Consumer Protection Network, Kunle Olubiyo had noted that given the level of financial liquidity in the sector, support interns of soft loans would provide leeway for the sector.
He noted that the schemes and financial interventions remained lauded but demanded urgent review, especially with supporting policies that would drive holistic results from the programmes.