Inspite of the teething problems confronting investors in the Nigerian power sector, the likelihood of default in repayment of power-sector loans has been underplayed by some economic players, who also make a big case for government intervention to hedge the banks and investors against loss, reports
In the estimation of the Managing Director of
The relief the resolution gave the banks later manifested in robust performances in virtually all the indices and this further raised their capability to participate actively in the recent privatisation of the nation's power sector. As at today, not less than
Search for Long-term Funds The search for long-term capital by the banks is to support the long-term financing needs of most firms that acquired the generating and distribution companies in
The Fear Unfortunately however, the enthusiasm of banks to roll their resources behind the power privatisation process seemed to be diminishing by the day.
The truth is that as a result of a chain of developments in the power sector, analysts said achieving the financial projections laid down between the various power companies and their banks may be a tall order. Today, the generating companies are complaining of a number of challenges, chief among which is lack of gas needed for the transmission. Other challenges include vandalisation of gas pipeline and power assets. The situation at the generating level is obviously taking tolls on the performance of the various distribution companies with the attendant strain on revenue generation.
THISDAY checks showed that most of the Discos are far from their revenue targets amidst strident complaints by electricity users who insisted nothing had changed in power supply. This scenario is already giving some bank executives goose pimples as it dawns on them that the current developments are already making nonsense of their initial projections with the attendant fear of a return of the era of loan defaults in banks.
The seriousness of the situation has also made some analysts to fear that the new Governor of the
When confronted with this scenario, Chike-Obi, who acknowledged the fear over the fate of power sector investors, said people should not look at AMCON's direction in case the problem of loan default crops up again. He said: "I think the mood in the country right now is for AMCON not to buy any more loans and as far as we are concerned, we are not buying any more loans. So, it will be very unfortunate if the scenario you painted comes about but people should not look to AMCON's direction if that crisis should come up."
Systemic Risk In the opinion of the Managing Director, Financial Derivatives,
"If you guarantee, just like the
No Cause for Alarm Yet Looking at the development in the power sector from banker's point of view, the Managing Director Wema Bank Plc, Mr. Segun Oloketuyi, said all the banks that participated in the power sector financing were aware of the challenges in the sector, saying that was why they chose long-term financing for the project. According to him, "It is obvious that loan repayment is done from the cash flow. When the cash flow is challenged, and then there is need to worry about the quality of the loans. I think the problem we have today is a carry-over of what the defunct
"If we take a short-term view of these projects, I think we may run into trouble but if we take a long-term view of the lending we have done then I'm sure it will get better because this country cannot go on like this without adequate power. No country can develop without power, it is a developmental agent. The major input in power generation is gas. Investment has also been done in gas to convey gas from the point of production to where we are going to utilise it. Pipelines are required; those investments need to be made. Without them being made, it will be a tough one and I think government also need to concentrate on infrastructure needed. A lot of support is needed in the transmission line so that leakages in the transmission line are also minimised, then we will get there. But if we take a short-term view, what is going on today will be a big challenge."
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