CBN May Sanction Banks Over Loans To Power Firms

The Central Bank of Nigeria (CBN), on Monday, imposed a monetary sanction for commercial banks that breach the terms and conditions of the Nigerian Electricity Market Stabilisation Facility (NEMSF) with the CBN.

The apex bank in a circular signed by the director, Financial Policy and Regulation, Kevin Amugo, issued yesterday, said it would attract a fine of N2 million for the first infraction and termination of its mandate at further infractions.

The CBN had through the Deposit Money Banks (DMB) disbursed billions of naira from the N213bn power intervention fund to several power firms.

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The funds were disbursed to distribution companies (DISCOS), Generation companies (GENCOS) and other allied companies in the electricity chain.

Also, Central bank, in the circular, said any bank that opens additional bank accounts for a beneficiary distribution company, whether or not for the purpose of receiving payments, fines and fees for electricity consumed by its customers, without the prior written consent of the refinancer, “shall pay a penalty of N2 million on each account opened and shall be instructed by the refinancer to close the account and transfer all funds in the account into the Principal Collection Account (PCA) within 24hours.”

“If the infraction is not remedied after the expiration of the 24 hours, the bank will be liable to a penalty of N2 million per day for the number of days the account remains open,” the CBN said, adding that any further infraction will result in the “termination of the DMB’s participation as a Mandate Bank under the CBN-NEMSF.”

Recall that one year into the programme, the CBN disbursed the sum of N64 billion or 30 per cent of the facility to 18 participants. Five distribution companies received N41.06 billion; seven generating companies received N18.4 billion while six gas companies received N5.24 billion.

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Also, the apex bank had in March 2015, just before the general elections, disbursed the total sum of N18.26 billion to the first batch of beneficiaries of the N213 billion NEMSF, which comprised of two electricity Distribution Companies (DISCOs) and three electricity Generation Companies (GENCOs).

The CBN in June this year, also disbursed the fourth batch of the fund, giving out N55.456 billion to 24 industry participants; three DISCOS, 14 GENCOS-NIPP inclusive, one service provider; and six GASCOS to further address the challenges of the sector.

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