In view of the huge amount put in by banks in the country to fund the privatisation of the power sector, which is currently estimated at $2 billion, the federal government has been urged to strengthen the power sector value chain to ensure the success of the project so that banks can recoup their investments.
Governor of the Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, who made this call in Abuja, stressed that the only way banks would get back their money was if investments were made into other areas of the value chain to boost the entire process.
“Lending for privatisation is the first step; the only way these loans are going to come back to the bank is for investment to go into the other areas of the value chain.”
Sanusi noted that if a bank put in money to finance a power generating plant and the plant did not have gas, and did not produce power then it would end up with a bad loan and “that is why we need to look at all the investment going into gas, generation, transmission, and metering.
“I hope we will recognise this as the important first step but not the final step in terms of financing the power sector,” he said.
Sanusi said at the weekend that bank lending to the power sector has risen to $2 billion.
He also disclosed that the apex bank provided some $10 million grant to the Bureau for Public Enterprises (BPE) to fund the entire power privatisation process and also financed an infrastructure financing plan which was now part of the infrastructure master plan that is being prepared by the Ministry of National Planning.
He stressed that the banking sector has demonstrated not only the capacity to raise the enormous funding needed in the power sector particularly if the projects were viable, but was even positioned to commit more of their balance sheet size if the appropriate reforms were put in place.
“Banks would never have put $2 billion to PHCN or to NEPA but they have given such a huge amount to these companies because they believe that this process is something that is going to protect their assets,” he said.
Sanusi spoke in Abuja at a special forum on ‘Financing the Power Sector Reforms for Economic Development,” sponsored by the Nigerian banks and supported by the CBN.
He noted that the forum was to showcase how much the Nigerian banking sector has contributed to support the federal government’s transformation agenda and how the economic reforms have enabled the Nigerian banking industry to be a major catalyst for development.
“Not many Nigerians know that the Nigerian banking system has put close to $2 billion into this power privatisation process and what the Central Bank of Nigeria (CBN) has done in financing the privatisation process through the $300 billion power and aviation fund which has added 700 to 800 megawatts of electricity to the generating capacity in the country.”
The governor also disclosed that the engagement of the banking community with power has been a long one and that the apex bank reviewed the provincial guidelines, recognising longer term lines for measuring asset quality based on gestation period for products and target sectors.
Information from Leadership was used in this report.