News Column

CBN Leads Initiative to Finance Gas-to-Power

August 5, 2014

Chineme Okafor



The Central Bank of Nigeria (CBN) is to lead an initiative that will provide financial package to ensure steady production and supply of gas to Nigeria's power sector.

Starting with its decision to offset an outstanding N25 billion gas related legacy debt owed to gas suppliers by the defunct Power Holding Company of Nigeria (PHCN), the CBN said set it is to set up a special purpose vehicle (SPV) with the Bankers' Committee to support the gas-to-power programme of Nigeria.

CBN governor, Godwin Emefiele, stated, at a recent inter-agency press briefing between the CBN, ministries of petroleum resources, power, Nigerian Electricity Regulatory Commission (NERC), Nigerian National Petroleum Corporation (NNPC) and Department of Petroleum Resources (DPR) in Abuja, that the bank will in collaboration with the Bankers' Committee provide some forms of intervention to the gas-to-power sector.

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke had at the inter-agency press briefing disclosed a package of short-term measures initiated to address lingering issues of gas supply to Nigeria's thermal power plants.

Some of the initiatives announced by Alison-Madueke include the upward review of gas price from a hitherto $1.50 per million cubic feet (mcf) to $2.50mcf and an additional $0.80 as transportation costs for new capacity as well as the CBN's financial package for the sector.

Providing further clarifications on the CBN's intervention measures Emefiele said: "The issue for us is that the Bankers' Committee has had some engagements where the CBN governor was asked to continue discussions with the petroleum and power ministries. The engagements revealed that there is an outstanding legacy debt of about N25 billion and we thought that, as financial catalyst in this process, what we should do is to give support by ensuring that existing gas suppliers are given some confidence by ensuring that the existing debts are paid off."

He added: "The CBN as well as the deposit money banks will be seeking for ways to set up an SPV whereas this N25 billion will be paid to the existing gas suppliers, give them confidence to continue to produce gas which is badly needed to continue to power our generating plants."

Emefiele noted that power is very essential to unlock the potentials of the Nigerian economy. He said: "To do so, we felt that it is important for us to look at some of the issues that are militating against the production of power in the country and that is why we started this engagement in collaboration with ministries of petroleum, power and NERC and to see how can we remove some of the bottlenecks."

"One of which has to do with the facts that investors that would have liked to come into the sector are saying that the price for gas is not competitive and hence, we decided to engage the NERC which is what you see in the adjustment. We hope that with this adjustment, it would be more competitive for both existing and potential gas suppliers to come in, as well as the buyers."

He added that as financial catalysts, the bankers and the CBN are not only saying that the projects are viable for commercial loans but that they can help by "sowing some seeds and provide some forms of intervention funds at concessionary terms to support their endeavour to provide power to our people and improve our economy."


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: AllAfrica


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters