Nigeria: World Bank Approves $3 Billion Loan For Nigeria’s Power Sector

Nigeria: World Bank Approves $3 Billion Loan For Nigeria’s Power Sector

The World Bank has approved Nigeria’s request for a $3billion loan for the expansion of the transmission and distribution networks in the power sector.

The minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, who disclosed this, noted that the country is set to get approval of the first tranche of the $3 billion loan which is being secured from the World Bank for the power sector by April 2020, as it begins talks with United Kingdom and Dutshe Bank on Jollof Bond.

Speaking during a press briefing at the end of the 2019 Annual Meetings of the International Monetary Fund (IMF) and World Bank in Washington DC yesterday, Ahmed said the federal government had put a request for financing of the sector at the range of $1.5 billion to $4 billion.

She said, “At the end of the day, it is like we would be looking at the funding size of $3 billion that will be provided in four tranches of $750 million each. Our plan is that the team will be able to go to the World Bank for the approval of the first tranche in April 2020.

“The $3 billion that we are trying to raise from the World Bank is for financing the power sector. This financing will include right now, the gap between what is provided for in the current tariff and the cost of the businesses themselves. So, there is a tariff shortfall but it would also enhance our ability to pay the previous obligations that have crystallised that we have not yet been able to pay.

“Some portion of it will be for the transmission network and if we are able to expand the facility to $4 billion, the additional $1 billion is for the distribution network. It will help us to exit the subsidy that is now inherent in the power sector. It is supposed to be to reform the sector, to restore the distribution business side of the sector especially on a stronger footing so that they are freed up enough to go out and raise financing to invest in expanding the distribution network.”

The minister while, noting that discussions at the week-long meetings had been around the power sector recovery programme, said, “We received an update on the outstanding issues covering sustainable fiscal support, policy as well as regulatory environment.

“We also discussed extensively the need for the sector to be more operationally efficient and also the infrastructure investment that would be required to ensure the power sector is restored to full production in a manner that is sustainable.

“We identified the imperative of solving two critical problems. One, which is operational efficiency and two, revamping associated infrastructure in the power sector to ensure that the overall success of the intervention in the power sector are achieved

“We made two set of requests to the bank. The first is technical assistance from the bank to implementing agencies especially the Nigeria Electricity Regulatory Commission (NERC) on the review of the performance improvement plans of the distribution networks and also two, we asked for technical assistance on business continuity regulation as well as technical assistance to the Ministry of Finance in the assessment of contingent liabilities in the power sector and options of dealing with them”.

Asides the $3 billion power sector loan it is getting from the World Bank, Ahmed said the ministry held meetings on securing a local currency bond to be raised from the international market.

She continued: “I am happy to announce the willingness of the UK authorities to support our infrastructure financing through the possible issuance of  Jollof Bonds. Already a working committee is being set up to interface with Nigeria on this possible naira denominated bond. The CBN will be leading in these efforts we will also explore all options in this regard at the next UK investment summit that will be holding in January 2020.

“The Jollof Bond, some countries call their own Masala bonds. Essentially these are bonds that are issued offshore but denominated in the local currency and the importance of such a bond is that it protects the country, the issuer from exchange rate exposure. We are contemplating such a bond.

“There have been proposals made to us not just by the UK government but also by Deutsche Bank and today also by the World Bank. We are looking at that as another instrument to raise financing for the national budget. In the past we have issued euro bond which have done well but we are considering this option because it could be cheap and even if it is not, it will be more cost effective because we are protected from exchange rate differential risk.

FG Earmarks $1.61bn For 24-hour Power Supply

Meanwhile, the managing director, Transmission Company of Nigeria (TCN), Alhaji Usman Gur, has revealed that the federal government, in collaboration with international donor agencies, has set aside over $1.61 billion to ensure constant power supply in the country.

Gur, who is also the chief executive officer of the TCN, revealed this yesterday in Kano while briefing journalists at the Kumbotso power sub-station.

According to him, the project will be carried out under the Transmission Rehabilitation Expansion Programme. “We are rehabilitating and expanding to 20, 000 Mega Watts by 2022 across the country,” he said.

He noted that the federal government had already earmarked about N32 billion to compensate Nigerians whose lands, houses and farms would be affected by the right-of-way to create power lines for the execution of the project.

The MD stated: “The total amount that we are going to pay for compensation across the country is about N32 billion. And the total project cost is $1.61 billion. The project will be supported by various international donors.

“The compensation for right-of-way from Kumbotso sub-station to Rimi Zagara will cost about N3 billion. We have not completely validated it – the total cost for compensation across the country being provided by the Federal Government”.

Gur, who is also the chairman of the West African Power Pool (WAPP) Committee Executive Board, stated that he led the TCN team to Kano to validate and look at the route that ran from the Kumbotso Transmission sub-station to Rimi Zakara.

He said, “You know we are going to connect Rimi Zakara to this sub-station (Kumbotso). Rimi Zakara is the place we are putting another 330 KV sub-station, just like this one in Kumbotso.

“The mistake that happened in the past was that we normally awarded contract for lines without doing the study. You know the study will establish who the people under the right-of-way are and those people that are going to be affected by the lines.

“So, we are supposed to have come up with those people and pay them their compensation. Unfortunately, this contract was awarded many years ago, even before I came. It is not only this one; many of them are like that. They awarded the contracts without the payment of compensation.

“That is why now, we are trying to pay the compensation; we are validating it, but we also need to tell people that this takes time because right now, we have over 1000 people who need to be compensated within Kano alone.

“That is why I am here. I will go through the routes and see exactly what are in the right-of-way. We are actually collaborating with Gov. Abdullahi Ganduje because some people who have land on the right-of-way are seeking for relocation. We are going to request to the governor to relocate them and give them land in some other places so that we can build the line”.


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