As part of its efforts to help boost the country’s real sector, the Central Bank of Nigeria (CBN) has, in the last 10 years, led initiatives aimed at ensuring that the nation actualises its adequate power supply quest, writes TONY CHUKWUNYEM
Clearly, many Nigerians must have heaved a sigh of relief when it was widely reported a few days ago that the free distribution of electricity meters to consumers in the country, under the National Mass Metering Programme (NMMP), commenced last Friday with the simultaneous inauguration of the scheme in Kano, Kaduna, Eko and Ikeja electricity distribution companies’ franchise areas.
According to a national newspaper’s report, the free distribution of meters is in fulfilment of President Muhammadu Buhari’s promise to ensure mass metering in the country, thereby finally resolving the vexatious issue of estimated billing in the electricity sector.
The report quoted an unnamed Presidency official as saying “the NMMP is to roll out six million meters for all connection points on grid without meters over the next 18 to 24 months, estimated to impact 30 million consumers nationwide.
“Following Mr. President’s directive on mass metering, the Central Bank of Nigeria, on October 18, approved guidelines for funding the mass metering programme, which entailed that all meters under the scheme will be locally sourced, creating thousands of manufacturing jobs through lead manufacturers such as MOMAS, MOJEC and others.”
Financing of NMMP framework
Indeed, in its framework for financing the NMMP, the apex bank said the scheme was aimed at closing the current metering gap of over 10 million in the Nigeria Electricity Supply Industry (NESI).
It further stated that the closing of this gap was expected to “enhance efficiency of revenue collection by distribution companies (DisCos) and thereby facilitate meeting their obligations to other upstream market participants.”
The guidelines also show that the interest rate for eligible companies accessing loans under the programme will not be more than nine per cent per annum, “or any other rate as may be specified by CBN.”
However, the banking regulator said that as part of its COVID-19 relief package, “the interest rate to be charged up to 28th February 2021 shall not exceed five per cent per annum.”
In addition, it said the facility had a maximum tenor of 10 years, but not exceeding 2030, adding that “there shall be a moratorium on the principal amount for a period not exceeding 24 months from date of loan disbursement.”
On collateral requirement for the loans, the CBN said: “NERC’s approval of a DisCos loan request as a regulated debt obligation to be charged against all energy collections for the Nigeria Electricity Supply Industry (NESI) as the next line charge in the payment waterfalls of each DisCo below the existing payment to the Nigeria Electricity Market Stabilization Facility (NEMSF), will serve as a collateral for the lending.”
Framework for solar connection intervention facility
Also, in line with its efforts to support the Federal Government’s drive to ensure adequate power supply for the country, the CBN had in September this year unveiled a framework for the implementation of a solar intervention facility.
It said the facility was designed “to complement the Federal Government’s effort of providing affordable electricity to rural dwellers through the provision of long term low interest credit facilities to the Nigeria Electrification Project (NEP) pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.”
The regulator noted that the Federal Government, as part of its Economic Sustainability Plan (ESP), had launched an initiative to achieve the roll out of five million new solar-based connections in communities that are not grid connected. It pointed out that the programme was expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution, thus helping the economy recover from the impact of the coronavirus (COVID-19) pandemic.
Specifically, the CBN said the initiative was expected to boost energy access to “25 million individuals (five million new connections) through the provision of Solar Home Systems (SHS) or connection to a mini grid; increasing local content in the off-grid solar value chain and facilitating the growth of the local manufacturing industry; and incentivizing the creation of 250,000 new jobs in the energy sector.”
According to the apex bank, funding for participants will not exceed 70 per cent of the total cost of the project, while facilities granted under the facility “shall have a maximum tenor of up to 10 years as determined by the project’s cash flow profile but not exceeding December 31, 2030.”
It also stated that the amount for working capital for mini grid developers, under the scheme, would be determined “as a percentage of the average of 3 year adjusted projected cash flows subject to the maximum of limit of N500 million.”
N300bn Power and Aviation Intervention Fund
However, the CBN’s support for efforts to improve power supply in the country did not just begin this year.
In fact, in August 2010, the banking watchdog established a N300 billion Power and Aviation Intervention Fund (PAIF) aimed at sustaining private sector investment in the two sectors.
The regulator said that the amount was part of the initial N500 billion intervention fund it announced earlier in April 2010 in a bid to catalyse financing of the real sector of the Nigerian economy, adding that the objective of the fund was to help sustain private sector investment in the two sectors.
Specifically, the PAIF was targeted at fast-tracking the development of electric power projects, especially in the identified industrial clusters in the country; improving power supply, generating employment, and enhancing the living standard of the citizens through consistent power supply, among other objectives.
The apex financial institution said the Bank of Industry (BoI) was the managing agent vested with the responsibility for the day-to-day administration of the Fund, while the African Finance Corporation (AFC) was the Technical Adviser.
N213bn electricity stabilisation facility
In the same vein, the CBN in 2014 initiated a N213billion Nigerian Electricity Market Stabilisation Facility (CBN-NEMSF), which was designed to fund market shortfalls arising from poor collections, as part of the commitments it reached with other stakeholders, including the Ministries of Power and Petroleum Resources as well as the National Electricity Regulatory Commission (NERC), to find a lasting solution to poor power supply.
To ensure effective implementation of the initiative, the CBN signed a Memorandum of Understanding (MoU) with deposit money banks (DMBs).
Speaking at the ceremony, CBN Governor, Mr. Godwin Emefiele, said the agreement was necessary because the lenders were the channels through which the facility would be disbursed.
He noted that the occasion was a bold step in the banking sector in supporting government’s efforts toward bringing stability to the critical power sector.
Emefiele explained that the facility became necessary in view of the need for investors to clear legacy debt as well as makes the sector economically viable.
N1.095trn credit to power sector
According to the CBN’s 2018 annual report, the apex bank had granted total credit of N1.095 trillion to the power sector under the three different schemes it set up.
Apart from the NEMSF and PAIF, the regulator had also established the N701billion Payment Assurance Facility (PAF) for the Nigerian Bulk Electricity Trading Plc (NBET) to settle invoices of generation companies (Gencos) to a minimum level of 80 per cent.
The report showed that the sum of N62.88 billion was disbursed to 37 projects in the power sector in 2018, under the NEMSF, and this brought the cumulative disbursement since inception of the facility in 2014 to N183.09 billion.
It further stated that the total of N14.89 billion was repaid by 11 Discos during the review year, bringing the cumulative repayment since inception to N30.46 billion.
Giving further details about what had been achieved in the sector through the NEMSF, the CBN said: “Execution of capacity recovery programme was carried out in three hydro power stations as follows: intake under water repair project, overhaul of Unit 4 and compliant metering/supplementary protection at Shiroro Dam; overhaul of 2G6 at Jebba Hydro; and rehabilitation of three units at Kainji Dam.
“Rehabilitation of 10 gas turbines at major thermal power plants, including Geregu, Transcorp Ughelli, and Ibom Power Plants.”
Also on the achievements recorded in the NEMSF implementation, the apex bank stated that the scheme enabled Discos to carry out projected capex through issuance of letters of credit (LCs) for the purchase of over 704,928 meters; rehabilitation of over 332 kilometres (km) of 11 kilovolt (kV) lines and 130km of 0.45KV lines; 511 transformers purchased and installed and construction of 56 new distribution substations as well as acquisition of a mobile injection substation.
On the PAIF, the apex bank stated that N21.99 billion was released to the BoI for five power projects under the facility.
“These were the Kano Hydro Power Project (N3.01 billion); Ashaka Cement Limited (N6.75 billion and N3.25 billion); Azura Power Project (N4.93 billion); and Para Energy and Natural Resources Development Limited (N4.05 billion).
“By end-December 2018, the cumulative amount released to the BoI, under the intervention, stood at N301.37 billion, out of which N180.61 billion was disbursed for 45 power projects and N120.76 billion to 24 airline projects,” said the CBN.
It equally explained that repayments within the year stood at N25.69 billion, comprising N10.19 billion from airline projects and N15.50 billion from power projects, with cumulative repayment from inception in 2010 standing at N145.52 billion, of N71.13 billion for airline and N74.39 billion for power projects.
Concerning achievements recorded through the PAIF, it stated: “A total of 1,398.8MW of power was financed under the scheme. The Fund also financed the construction of 120 kilometre natural gas pipeline from Ikpe Anang in Akwa Ibom State to Mfamosing in Cross River State.”
Noting that the PAF was a bridging facility, the CBN explained that through it, the NBET provided a minimum level of payment to power Gencos to enable them to meet their obligations to gas suppliers.
“The aim of the facility is to support increase in the level of power generation in the country. A total of N424.49 billion was paid for invoices in the review year. This comprised N183.17 billion paid to Gascos (gas companies); Gencos, N234.59 billion; equipment suppliers, N132.33 million; and withholding tax, N6.60 billion. Cumulatively, the sum of N534.18 billion had been paid, under the intervention, since its inception,” it explained in the report.
Although inadequate power supply remains a major issue in the country, analysts point out that the situation would have been worse without the CBN’s intervention in the sector.and off-grid energy retailers in the coun