CBN, Banks to Defray PHCN N25bn Gas Debt, Emefiele Wants the Rich to Pay More for Electricity Services

The federal government yesterday announced its commitment to  an initial N33 billion soft term credit line to support the metering plans of the distribution companies in Nigeria’s electricity supply industry.
The government stated that its decision was informed by the huge gap in metering facilities available to consumers in the country’s electricity sector.
This came as the bankers’ committee yesterday endorsed  the decision of the Central Bank of Nigeria (CBN) to settle the N25 billion gas-related debt incurred by the defunct Power Holding Company of Nigeria (PHCN).
The metering gap in Nigeria’s electricity sector is put at about 2.8 million by the Nigerian Electricity Regulatory Commission (NERC).
NERC also said the gap requires urgent attention to close-up and improve monthly revenue accrual to the industry.
Speaking at the inauguration of the National Council on Power (NACOP), which includes relevant stakeholders in the sector, Vice-President Namadi Sambo said that the government was increasingly uncomfortable with incessant complaints of wide disparity in the billing of electricity consumers by the various distribution companies.
He was represented by the Minister of Power, Chinedu Nebo, in Abuja and explained that with the loan, the distribution companies would be made to procure smart meters to disburse to consumers within their networks.
He added that the question of adequate metering had become a national discuss that is of great concern to government.
“I have been informed that the question of adequate metering has been raised repeatedly in the course of this council and indeed in discussions among Nigerians.
“Government is greatly concerned that the metering levels amongst consumers remain low and the incidences of arbitrary or estimated billing still exist. For the power sector to progressively grow in the direction in which government intends it to be, this metering gap must be bridged immediately,” Sambo said.
While stating that the total sum of N752 billion which was budgeted to help grow the capacity of Nigeria’s transmission network will be expended judiciously, Sambo also noted that a number of efforts were being made by the government to equally ensure that all participants in the country’s electricity market have access to needed funds with soft and long term conditions.
Similarly, Sambo in his inauguration remarks, requested state governments to scale up their commitment to projects that will improve electricity services within their localities in advancement of the country’s liberalised power sector.
He said the liberalisation era now gives other participants other than the federal government the opportunity to invest in the improvement of Nigeria’s electricity profile.
“It is obvious that this will contribute significantly to ensure that every aspect of the power sector reform agenda is implemented to the letter.
Meanwhile, the Governor of the CBN, Godwin Emefiele, has advocated that wealthy Nigerians should pay more for electricity services as part of attempts to subsidise electricity consumed by poor Nigerians.
Emefiele also said the review of electricity tariff would always be necessary to accommodate extant market prices and associated costs such as the price of gas.
He stated at the monthly meeting of electricity operators with the NERC that the industry should counterbalance the burden of electricity tariff by shifting more costs to richer citizens in the society and less cost to the poor.
A statement from NERC quoted Emefiele to have said that those who are earning higher incomes should be ready to pay more for electricity services for the industry to remain sustainable and reliable.
The statement was signed by the Head of Public Affairs at NERC, Usman Arabi, in which Emefiele reiterated that the CBN was working with NERC and other agencies of government to ensure that issues relating to gas related legacy debt in the industry are sorted out and paid.
He explained that gas suppliers would have to commit themselves to provide enough gas to power plants in the sector, adding that he will raise the issues on gas-to-power at a meeting with members of the CBN board.
Emefiele equally urged operators in the industry to act as financial catalysts as the bank steps in to resolves the problem.
He noted that there are brilliant opportunities for banks to make money in the power sector.
Meanwhile, speaking to journalists at a media briefing at the end of the 317th bankers’ committee meeting in Lagos, the Managing Director, Ecobank Nigeria Limited, Jibril Aku, disclosed that a special purpose vehicle (SPV) would be set up to clear the debt.
He pointed out that the debt had been a major concern to the banks that supported the privatisation of the PHCN assets.
“Today, there is enough incentives for the gas companies to produce gas and that is necessary because when you look at the 26 generating stations in Nigeria, they are all gas-dependent. So, we feel, that is one major incentive that would help the gas companies to begin to produce locally.
“Another incentive has to do with the legacy debt. The legacy PHCN had accumulated of about N25 billion and the gas companies have always been agitating that the debt should be paid otherwise they would not produce to begin to accumulate new debts.
“The bankers’ committee is willing to support an initiative where an SPV would be set up, that would provide loans to clear that debt and over time, the loans would be recovered from the multi-year tariff order (MYTO) and direct deductions, where the central bank would play a key role in assisting the banks to do that,” the Ecobank Nigeria boss explained.
Aku, who spoke on behalf of other bank chief executive officers in the country, expressed optimism that once most of the problems of gas-to-power are resolved, the consumers would begin to see the generating companies produce at a higher level.
On his part, the Group Managing Director/Chief Executive Officer, Access Bank Plc, Herbert Wigwe, revealed that the committee decided to contribute a total of N15 billion to the Victim Support Fund.
He said the amount would be shared among the banks, based on size and profitability.
“We are fully aware and cognisance of the fact that if you don’t contribute to the betterment of your system, it would always come back to hurt. Perhaps if you don’t do it, talking about profitability one day may never exist,” Wigwe said.
Speaking on the bank verification number (BVN) and the cashless policy, the Access Bank boss said bank chiefs were not pleased with the extent at which the initiatives were been enforced nationwide.
“So, the agreement reached was that banks are supposed to deepen the overall level of enrolment of their customers under the national biometric project,” he said.
The Chief Executive Officer, Skye Bank Plc, Timothy Oguntayo also said the committee resolved to support local production of rice, saying that presently, the country has about 18 milling plants that have installed capacity of 1.1 million metric tones
According to Oguntayo, Nigeria as a major consumer of rice, imports about 3.4 million metric tonnes of rice. This, according to him has negative effect on the country’s forex reserves.
“So, if we can bring the 1.1 metric tonnes rice production in the country to optimum level, we would have saved a significant portion of the foreign exchange that we currently spend on importation.
“As an industry, we have decided to support the milling plants to a high level of production and also support them to embark on backward integration. In this way, the industry would be supporting the real sector,” he added.
The Director, Banking Supervision, CBN, Tokunbo Martins said the long-awaited N220 billion micro, small and medium enterprises development fund (MSMEDF) would be launched by President Goodluck Jonathan on August 19th, 2014. 60 per cent of the fund would be dedicated to female entrepreneurs.
Source: Thisday

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