The deal is part of efforts to end chronic electricity shortages that are a major brake on growth.
Nigeria produces only a few hours of electricity a day, forcing those who can afford it to rely on expensive diesel generators that drain billions of dollars from Africa’s second largest economy and discourage foreign investment.
President Goodluck Jonathan is on a drive to increase investment in the power sector and has nearly completed the privatisation of its inefficient state electricity company.
According to Reuters, a loan from China’s Eximbank will pay for 75 per cent of the planned 700 megawatt Zungeru hydro-electric power plant, while the federal government has put up the rest of the cash.
The plant would be a boost to the country’s current 4,500 megawatt electricity capacity and is scheduled to be finished in four years, although Nigerian projects usually run over time and over budget and many are never completed.
The building of a hydro plant in Zungeru, Niger State, was first announced three decades ago but this is the most significant effort yet to get the project underway, experts say.
“This project will create thousands of jobs for Nigerian engineers, technicians and artisans during the construction phase … It will also boost the economy,” Coordinating Minister for the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, said in a statement.
Despite holding the world’s ninth largest gas reserves, Nigeria only produces a 10th of the amount of electricity as South Africa for a population three times the size.
In a related development, the First City Monument Bank (FCMB) Group, at the weekend, said it had committed over $275 million to the ongoing power sector reform as well as the value chain opportunities.
The bank’s Group Head, Project and Structure Finance, Capital Markets Limited, Mr. Robert Grant, disclosed this in Abuja, at a special forum titled: “Financing the Power Sector Reforms for Economic Development”, which was organised by the Central Bank of Nigeria (CBN) to showcase the N300 billion Bank of Industry-Power and Aviation Intervention Facility (BOI-PAIF) initiative which was launched in 2010.
He also reaffirmed the bank’s commitment towards providing the necessary support to ensure the successful implementation of the ongoing reforms in the sector in line with its contribution towards national development.
Grant further noted that FCMB Capital Markets was actively involved in the ongoing Niger Delta Power Holding Company’s (NDPHCs) privatisation of its 10 National Integrated Power Projects (NIPPs).
He also assured of FCMB Group’s commitment to the power privatisation Roadmap.
Also speaking at the occasion, Vice President Mohammed Namadi Sambo, had acknowledged the support provided by the Nigerian banking industry to the power sector till date, and appealed for continuous commitment towards achieving 20,000 megawatts (MW) of electricity generation by the year 2016.
Sambo had also noted that reforming the power sector had become critical to developing the economy.
He said the federal government and other stakeholders including the Bureau of Public Enterprise (BPE) were determined to ensure that the privatisation of the Power Holding Company of Nigeria (PHCN) was concluded on schedule and that the Roadmap for Power Sector Reform Programme was on course, stressing that all hands must be on deck to realise the 20,000 MW-target.
FCMB was one of the first banks to access the BOI-PAIF with provision of a N3.2 billion Term Loan Facility to Tower Power Utilities Limited (TPUL) for their 17.75 MW combined cycle gas fired power generation plant in Otta Industrial Estate, Ogun State.
The feedstock is gas supplied by Shell through a pipeline, which terminates in the Ota Industrial Estate. Apart from scheduled maintenance, the gas supply has been uninterrupted since inception. The plant provides power to several enterprises including but not limited to Aluminum Rolling Mills, Kolorkote Nigeria Limited, Eagle Packaging & Printing, Green Fuels, Dychem, Covenant University and Euro Global & Food Distilleries.
The clear value proposition is the constant power supply that has significantly improved efficiency, competitiveness and profitability as almost all TPUL’s customers have effectively de-mobilised their existing diesel-fired assets.
In addition to the distribution companies (Discos), FCMB Group has financed gas pipelines, gas processing projects, and greenfield and brownfield IPPs.
Apart from FCMB Limited (the group’s commercial banking arm) providing debt finance, FCMB Capital Markets has provided advisory services including structuring, arranging, syndicating transactions as well as post-closing technical support in its role as Technical Bank.
FCMB Group had been positioned as the premier financial services group of African origin with talented work-force that drives a comprehensive bouquet of financial services, and focused on providing simple and reliable services to our customers.
Information from This Day was used in this report.