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Power supply to receive boost as FG approves N8.64bn payment to Siemens AG

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The Federal Government has granted anticipatory approval to President Muhammadu Buhari to release €15.21 million (N6,940,081,465.20) offshore and N1.708 billion onshore, a total of N8,648,081,465.2, as counterpart funding for the power deal with Siemens AG, signed between Nigerian and German governments last year.

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The Minister of Finance, Budget and National Planning, Zainab Ahmed, stated this while briefing State House Correspondents after the 10th Virtual Meeting of the Federal Executive Council presided over by President Buhari on Wednesday, in Abuja

Ahmed said Power Minister, Saleh Mamman, presented a memo as part of plans to strengthen Nigeria’s epileptic power supply.

BusinessDay gathered that the fund is part of the counterpart funding for the bilateral from German Consortium guaranteed by the German government through Euler Hermes to finance the implementation of the end to end grid modernization and expansion programme of the project.

The Federal Government had in December 2019, allocated N61 billion for the Nigeria Electrification Road map which will be developed in partnership with Siemens AG.
Recall that Nigeria government and Siemens had in 2019 signed a Letter of Agreement on the Nigeria Electrification Road map after President Buhari and the German Chancellor, Angela Merkel met on August 31, 2018, in Abuja.

Under the agreement Nigeria is expected to spend about €3.11 billion or N1.15 trillion across four major states, in its bid to improve power supply

The Nigerian electrification project has three phases and it aims at achieving 25,000 megawatts of electricity in the country by 2025.

Power projects in the budget include the 3,050-megawatts Mambilla hydropower plant in Taraba State, for which N2 billion counterpart-fund was set aside. Others are 2x60MVA 132/33kV substation at Gwaram in Jigawa State (N717 million); 215MW power station in Kaduna (N190m); and Kashambilla transmission in Taraba (N506 million).

Ahmed said the amount is for first phase of the three phases project designed to include 23 transmission initiatives as well as 175 separate transformative projects.

The Council had discussed the stage one of phase one of the project under presidential power initiative designed to include 23 transmission initiatives as well as 175 separate transformative projects in the electricity distribution franchises that we have in the country.

“The project will also support the regulator, Nigerian Electricity Regulatory Commission (NERC), to transition towards a programme of improving metering in the electricity industry in the country.

“Let me remind us as citizens that Mr. President and his German counterpart met in Abuja in 31st August 2018 and committed to jointly increase the capacity of the Nigerian electricity grid from current capacity of 5,000 megawatts to 25,000 megawatts over a three phased Programme.

“After this meeting, an MOU was executed on the 23rd of July, 2019 between the Nigerian Government and the Siemens AG with the German Government support.

“The MOU is designed to deliver this end to end modernization programme which we are calling the presidential power initiative. The objective of this presidential power initiative is to address the intractable problems that have bedeviled the Nigerian power industry, over a period of years.

“The project will be implemented in three phases and the subject of our memo today is phase one.

The facility for this programme is to be sourced from the German consortium and it would be guaranteed by the German government through Euler Hermes covering 85 percent of the project cost, the highly concessional facility with two to three years moratorium, 12 years loan repayment period with an interest rate of liabor plus one percent to liabor plus 1.2 o. And also the Federal Government is to provide 15 percent counterpart funding as its contribution towards the project.

“We have a provision in the 2020 appropriation revised for the government’s counterpart funding.

“The federal government is taking the loan from the German government with the plan to on-lend this particular loan to the distributing network. So, it’s a convertible loan facility to the DISCOs and we will be working with the DISCOs to restructure an appropriate loan agreement as soon as we are able to close out on this initial phase of the process. And council approved and ratified Mr. President’s approval.”