The Central Bank of Nigeria (CBN) and other stakeholders in the financial services sector have begun brainstorming on a banking industry funding strategy for the power sector, which will grant the template a quasi-regulatory status.
They are also expected to consider inputs from key non-bank stakeholders such as the Bureau of Public Enterprises (BPE), Nigerian National Petroleum Corporation (NNPC), Ministry of Power, Energy Commission of Nigeria (Encon), and the Nigerian Bulk Electricity Trading Company (NBET), among others, in drafting the strategy. This is to give the plan a higher level of general acceptance beyond the banking industry.
The funding strategy would enable banks to provide well-structured finances to support investments in gas transmission pipelines, upstream gas developments, liquefied natural gas, LNG, and Liquefied petroleum gas, LPG plants. Others include gas processing facilities, key infrastructure, port, real estate, pipe milling and fabrication yards, and gas supply and gas transportation infrastructure, among others.
Besides, banks are required to reinforce their energy desk to build capacity for power project financing, while the Bankers’ Committee would continuously provide supports for advocacy and programmes that centre on the power sector transformation.
The Chairman, Economic Development and Sustainability of the Bankers’ Committee and Managing Director, Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, said: “Banks are aware that the growth, prosperity and national security of Nigeria depend on the success of the power sector transformation.”
According to him, the Bankers’ Committee will continue to collaborate with the government and other stakeholders to create a sustainable environment for private sector funding for investments in the power sector.
He noted the potential impact of stable and adequate power supply on the national economy, and identified inadequate power supply as the bane of the under-development and non-competitiveness of the Nigerian manufacturing sector.
He reiterated banks commitment to continuously explore ways of providing adequate and suitable finances to the three key sectors including power, agriculture and transportation. He added that the Bankers’ Committee’s focus on these sectors was borne out of the deep appreciation of the critical importance of the sectors as catalysts for the growth and development of the Nigerian economy.
The strategic funding plan is being developed under the auspices of the Bankers’ Committee, with active participation by top management of banks, the CBN and other key stakeholders.
The funding strategy is crucial in the Committee’s programme for 2013, which is largely focused on aligning the Nigerian banking system to provide adequate financing to meet the peculiarities of the power sector.
Banks’ chief executives, Governors and top officials of the CBN and several experts had brainstormed extensively on the power sector at the recently concluded 4th annual retreat of the Bankers’ Committee.
The Federal Government is looking beyond Nigerian banks to raise $3.4bn needed to fund power projects in the country, because of high interest rates being charged on loans by local banks.
But the Chairman, TCN, Mr. Tony Elumelu, called on Government to start considering Nigerian banks as sources of financing power projects.Elumelu, a former managing director of UBA Plc, spoke on behalf of the successful bidders for the power generating companies carved out of the Power Holding Company of Nigeria.
He said: “The Power minister made mention of banks that would fund the transmission grid project, but did not mention any Nigerian bank.“I think we should consider Nigerian banks in raising the over $3bn for this project as banks in the country have come of age.”
The Minister of Power, Prof. Chinedu Nebo, had earlier said that a total capital outlay of $3.4bn was required up to 2016, to bring the country’s transmission grid to evacuate all generated power.“Government is working out the funding of TCN’s long-term expansion plan from a mix, which will include the Transmission Development Fund, International Development Banks and multi-national agencies,” he said.
In addition, the establishment of the NBET as mandated by law, vesting of contracts as well as the stipulation of operational timelines were identified as key issues that banks in the country will consider before funding power projects in the transition stage of the on-going power sector reform.
NBET is also expected to address investors’ concern in the power generation sector on the credit worthiness of the distribution companies.Project finance analysts noted that the most complex projects in terms of the technology deployed, and the risks on infrastructure finance are usually higher in the power sector, with only railway projects nearing it in complexity.
Information from Vanguard was used in this report.