Nigeria’s deposit money banks (DMBs) have signed agreements that will enable them begin to disburse the N213 billion Nigeria Electricity Market Stabilisation Facility (NEMSF) that the Central Bank of Nigeria (CBN) is providing to offer liquidity in the gas sector and offset huge debts there.
The agreement follows similar pact signed by Nigeria’s electricity industry players last month as a first step to kick-start the disbursement
of the fund.
This signing was held Monday in Abuja where the Nigerian Electricity Regulatory Commission (NERC) also assured that there will be no increases in electricity tariff for residential consumers in the next six months even with the upcoming tariff review to be approved today.
In partnership with the banking sector, the CBN is providing this facility to address shortfalls in power sector revenues caused by immediate adjustments in the electricity tariffs as well as gas debts.
One of the two agreements signed was the terms and conditions that sets out the guidelines signed by the CBN.
The other was the participating agreement which simply sets out the roles of each of the DMBs and the CBN. The CBN facility, authorities
said will help resolve liquidity challenges in the electricity sector and particularly settle approximately N36.9 billion legacy debts owed to gas suppliers by the power sector over the last years.
It is estimated that the commitment will bring to the grid an additional 2.5 billion cubic feet per day of gas over the period from now till 2017 – over 80 percent of this gas will go to the power sector and it will support an additional 5 to 6 gigawatts relative to today’s capacity.
The facility will be disbursed at 10 percent per annual rate, with a tenor of not more than 10 years.
The agreements will be followed by disbursement of funds and monitoring implementation.
A special purpose vehicle (SPV) that complies with Section 31 of the CBN Act 2007 will serve as an intermediary between the banks and the electricity market players.
Sam Amadi, chairman, Nigerian Electricity Regulatory Commission (NERC), said that the objective of the facility is to ensure that the power sector is viable, reliable and essentially, for debt recovery.
“The facility will go a long way to help us ensure that while we continue to ensure that the tariff is cost reflective, it will not constitute
a burden on consumers immediately.
“So, for avoidance of doubt with this facility, there will be no increase of tariff for residential consumers for at least six months until we begin to see improvement.”
Amadi noted that the expectation is that with more gas coming to the power plant on account of the new funding, and other interventions, there will be increase in capacity, more reliability in the next two to four months that will be able to ensure that consumers will be much more comfortable to witness any increase. He said that the NERC will ensure that the tariff will be ready and will be approved today.
“That tariff is guaranteed and will come into effect tomorrow and allows for full recovery and ensures that there is no risk that is not
going to be fully covered by this transaction,” he added 