Nigeria gas sector debts reached a new high as CBN advances N5.24bn facility to ailing sector.
Legacy debts owed Nigeria’s gas sector by electric power operators reached an estimated N40 billion December last year, and still mounting, Godwin Emefiele, governor, Central Bank of Nigeria (CBN), said weekend, as he presided over the disbursement of N6.9 billion loan to mostly gas suppliers to help the ail- ing industry.
This is the third tranche disbursement out of the CBN’s N213 billion Ni- gerian Electricity Market Stabilisation Facility, which promises to inject liquidity into the power sector to, particularly pay for built- up shortfalls, including outstanding obligations to gas suppliers.
About 70 percent of Nigeria’s power plants are fueled by gas, and significant debts to gas suppliers had built up due to the absence of formal, direct and binding agreements between gas suppliers and power plants.
These debts were caused by the electricity tariff not reflecting the true cost of operating the recently privatized generation and distribution companies in the power sector, Emefiele said.
Out of the N6.9 billion loan, N5.24 billion was disbursed to six gas suppliers, including: N965 million to SPDC, N2.04 billion to Chevron, N230 million to Pan Ocean, and N739 million to Seplat.
NPDC and ND Western received N407 million and N852 million, respectively. Ibom Power Generation Company also got N1.7 billion, while there was a further tranche of N4.4 billion due payments to Eko Distribution Company.
For the gas suppliers, the payments represent debts by the power sector in proportion to the obligations to repay the facility by the five Discos: Eko, Ibadan, Kano, Port Harcourt, and Enugu, that have so far signed up to the facility.
During the disbursements, Emefiele acknowledged that the gas sector had little incentive to make the necessary investments in exploration and infrastructure to keep up with the growth in power generation.
Over 2,500mw of power that could be delivered is unutilized simply because there is no gas to fuel the existing power plants.
Emefiele recalled that addressing this issue, in Au- gust last year, the Nigerian Electricity Regulatory Commission (NERC) approved a new benchmark price of $2.50/mcf (one thousand cubic feet) for gas supply, and $0.80/mcf as transpor- tation cost for new capacity, a benchmark price, which he said was commercially viable to encourage existing and prospective gas suppliers to ramp up their investments.
As a contribution to ad- dressing this issue, the CBN agreed to go out of its core mandate to advance a N213 billion facility to the power sector to pay for built-up shortfalls including outstanding obligations to gas suppliers.
CBN does not have any business with the power sec- tor chain, but because it is a critical sector where most Nigerian banks have committed funding, especially during the privatization of the gencos and discos, he said.
He also assured that as more discos become confident that the issues arising from tariff regimes will be resolved and sign up to the facility, the CBN will make further disbursement to the gas suppliers and other power sector participants.