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CBN Ease Gas Supply With N6.9bn Loan Facility

By Anthony Otaru, Abuja
13 June 2015   |   2:08 am
AS a clear sign of Federal Government’s commitment to change the course of both the domestic gas and power sector, the Central Bank of Nigeria (CBN) yesterday signed a loan facility of N6.9 billion to gas and power suppliers in Abuja. The payment represent debts by the power sector in proportion to the obligations to repay the facility by the five Distribution Companies (DISCOS) of Eko, Ibadan. Kano, Port Harcourt and Enugu that have so far signed up to the facility.
Central Bank Of Nigeria building

Central Bank Of Nigeria building

AS a clear sign of Federal Government’s commitment to change the course of both the domestic gas and power sector, the Central Bank of Nigeria (CBN) yesterday signed a loan facility of N6.9 billion to gas and power suppliers in Abuja. The payment represent debts by the power sector in proportion to the obligations to repay the facility by the five Distribution Companies (DISCOS) of Eko, Ibadan. Kano, Port Harcourt and Enugu that have so far signed up to the facility.

A breakdown of the disbursement shows that Shell Petroleum Development Company received N965 million, Chevron N2.04 billion, Pan Ocean N230 million, Seplat N739 million, NPDC N407 million, and ND Western N852 million while Ibom Power received N1.7 billion respectively.

Signing the facility yesterday in Abuja, CBN Governor, Mr. Godwin Emefiele disclosed that it was the first time that the apex bank is able to make payment to the gas suppliers in the power sector with a view to revitalising Nigeria energy sector. “Last year, at one of our Bankers Committee retreats, where we focused on Gas to Power, we explored the issues in the gas to power value chain.

During these deliberations, it became clear to us at the Central Bank of Nigeria and the banking sector, that one of the reasons for the low power generation by the Generation Companies was inadequate gas supply and given the importance of gas to power sector we could not stand by and do nothing,” he stated.

He said that about 70 percent of power plants are fueled by gas, stressing that due to the absence of a formal direct and binding agreements between gas suppliers and power plants, significant debt to gas suppliers had built up from N25 billion to close to N40 billion as at December 2014.

“These debts or shortfalls were caused by the electricity tariff not reflecting the true cost of operating the recently privatised Generation and Distribution Companies in the power sector.”

Consequently, he said, “the gas sector has little or no incentive to make the necessary investments in gas exploration and infrastructure to keep up with the growth in power generation.”

According to him, “Today, we understand that over 2500MW of power that could be delivered to our businesses and homes is unutilised simply because there is no gas to fuel the existing power plants.”

To address this issue, the governor explained that the Nigerian Electricity Regulatory Commission approved a new benchmark price of $2.50/mcf for gas supply and $0.80/mcf as transportation costs for new capacity, a development, he described as commercially viable and good enough to encourage the existing and prospecting gas suppliers to ramp up their investments.

He noted that the CBN and the banking sector involvement is therefore predicated on tariffs, over the medium term, reflecting the true cost of doing business in the power sector.

Responding on behalf of Gas suppliers, the Director, NNPC/CNL Joint Venture, Mr. Supo Shadiya commended the CBN for the initiative and for bringing the historical moment to come to pass.

“Since we signed the MOU in November 2014, we’ve been waiting anxiously to see this day come to pass, I want to take this opportunity to emphasise that there is a very strong commitment on the part of the suppliers to our domestic market and indeed it is important for us to partner with the government to be able to achieve the vision, it has put in place over the years for the power sector.”

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