Abuja- The Central Bank of Nigeria (CBN) and the Deposit Money Banks (DMBs) have signed two Memoranda of Understanding on implementation of the N213 billion Power Sector Intervention Fund.
Mr Godwin Emefiele, the CBN Governor, disclosed this at the signing ceremony in Abuja.
The two agreements are terms and conditions that set up the guidelines for the fund and participation agreement that sets out the roles of the banks in the transaction.
“You will recall that about a month ago, the team, comprising the ministers of petroleum; power; the CBN as well as the Nigeria Electricity Regulatory Commission (NERC), signed the formal agreement with major stakeholders in the sector.
“ By stakeholders, I am talking about the gas suppliers, which comprise both the local and foreign companies; we also had the Transmission Company of Nigeria (TCN) and the representative of Distribution and Generating Companies.
“The team signed MOU with those who supply gas and produce electricity for our consumption.
“We are taking this bold step at this stage now to get the banks who are themselves going to act as the channels through which this funds will be paid to the Discos and Gencos and gas suppliers to come in to also sign their MOU at CBN with NERC and others,’’ he said.
According to him, the development is a bold step in the banking sector’s commitment to support government in resolving power problem in the country.
He said that the Nigerian banks had taken the bold step to fund and support the growth of the power sector in the country.
He added that gas supply to the generation companies was a problem, adding that it was a welcome development for banks to recognise these problems and opt to support the sector.
“I want to thank the minister of power, NERC, colleagues and DMBs for their commitment towards ensuring that legacy debts we have are cleared, so that the market can be seen to begin to be viable.
“And electricity can be seen to be generated and distribution improved upon for the good of our people.”
Emefiele said that two major problems of gas tariff and transportation had been identified and it was reviewed to two dollars, fifty cents and 80 cents respectively .
This, he said, increased the gas tariff to three dollars, 30 cents, which the gas suppliers said was commercially viable.
He said that it would not encourage gas production and supply but would indeed also encourage new investors to come into the market to boost the gas industry in Nigeria.
He assured that there would not be any review of tariff that would unduly affect Nigerians to the point they would not be able to pay.
“The tariff are being looked out for as well for it to be commercially viable and I am optimistic that by the time the tariff comes out, it will be according to standard of NERC.
“So, what we are doing here today is to say yes that we are at the point where the Nigeria Deposit banks as well as CBN are ready to work to disburse to clear the legacy debt, to clear the entire chain in power sector and business becomes viable for all ,’’ he said.
Dr Sam Amadi, Chairman, NERC, said the acquisition of the legacy debt had helped to guarantee a viable electricity sector.
He said that the objective of the facility was to ensure that the sector was viable, reliable and essentially to ensure cost recovery for the CBN and the other investors in the up or down stream of the sector.
“This facility will help us to ensure that we continue to ensure that cost in tariff is reflective and would not constitute a burden to consumers immediately.
“For avoidance of doubt, in this facility, there will be no increase of tariff for resident consumers for at least six months until we begin to see improvement.
“We expect that with more gas coming into the power plant because of this facility and other interventions, in the next three, four months, there will be increase in capacity and more reliability in the system.
“The metering plan that is ongoing will help to ensure that consumers are much more comfortable to witness an increase in power supply,’’ he said.
Amadi added that NERC would ensure that the tariff would be ready by Tuesday and approved, adding that it had been guaranteed and would come into effect from Tuesday.
“It will allow for full recovery and ensure that there is no risk that is not going to be fully covered in this transaction,’’ he said.
He said that over N500 billion worth of transaction market, with about 4,000 mega walts generated in the country.