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Monday, 22 September 2014
Nigeria: ‘Consumers To Repay CBN’s N213bn Electricity Bailout Fund’
The N213 billion facility arranged by the Central Bank of Nigeria (CBN) to bailout the electricity sector will be repaid by electricity consumers over a period of 10 years, the Nigerian Electricity Regulatory Commission (NERC) has said.
The CBN bailout fund which is meant to cover shortfalls in the Nigerian electricity market will be repaid through electricity tariff to be paid by consumers over the period, NERC chairman, Dr Sam Amadi, said.
According to the commission, the repayment spread of 10 years is an advantage to the market and consumers in view of the fact that its recollection will be in piecemeal over the period.
“They are giving us a 10-year period instead of five and this further reduces the tariff rate; it further reduces the amount that consumers will be paying. It is just like getting a loan and paying back in 10 years,” he said.
Amadi, who was speaking in Abuja at the weekend, stated that the N213 billion CBN facility now provides operators in the market handy funds which could be deployed to improve electricity services to consumers without the burden of a possible increase in electricity tariff.
“Don’t forget that every cost in the industry is ultimately repaid by the consumers and so it has reduced the incident of burden of repayment by stretching it over a long period of time which could result in freezing tariff increase as the case may be,” Amadi stated.
While emphasising that the fund will be deployed “only to meet established shortfalls in the market,” Amadi explained that the facility gives distribution companies (Discos) and generation companies (Gencos) money at hand that they will collect in piecemeal over the years as well as the opportunity to use the money for quick investments that will produce quick returns in terms of service improvements. He, however, pointed out that any operator whose operating expenditure do not match up as being prudent and relevant to its obligations in the market will not benefit from the fund.
Explaining further, he said, “Without this fund, consumers ought to pay for any shortfall in pricing. Essentially, the shortfall is a function of the price not being cost reflective and what we would have done is to put it back into the MYTO formula and work out the tariff increase that will cover it over five years. But the CBN fund gives opportunity for Discos and Gencos to have this money on time and for it to be paid over 10 years.”
An inter-agency initiative of the federal government, led by the minister of petroleum resources, Mrs Diezani Alison-Madueke, with support from the CBN and ministry of power, had at the weekend, announced the intervention fund.
The fund according to the top government officials is meant to boost gas supply to power plants and provide a lasting solution to electricity generation challenges faced in the country by addressing the current revenue shortfall in the market.