Banks’ Loan To Power Sector Exceed N800bn

Loans disbursed by banks to players in the Nigerian power sector stood at N836.08 billion at the end of June 2022, OduNews reports.

Banks' Loan To Power Sector Exceed N800bn
Banks’ Loan To Power Sector Exceed N800bn

This was contained in a report by CSL Stockbrokers Limited, Lagos (CSLS) titled “The continued rise of bank loans to power sector”,

The report disclosed that power generation firms and independent power producers owed banks an estimated N562.19 billion while power transmission and distribution firms are indebted to the tune of N273.89 billion.

Privatised in 2013, the Nigerian electricity sector has failed to live up to consumers’ initial optimism that the country would build nothing less than 40,000 megawatts of electricity.

But rather than achieve the ambitious milestone, official bottlenecks have continued to leave the sector stunted at about 3,000 megawatts, on the average, hobbled by incessant system collapse.

Only recently, the Central Bank of Nigeria (CBN), Godwin Emefiele, admitted that the apex bank had disbursed over N1.3 trillion to support power supply to Nigerians in the last 5 years.

Speaking at a news conference following a meeting of the Bankers Committee in Abuja, Emefiele said, “The CBN has always been there to support the power sector. We have disbursed over N1.3 trillion in the last five years to support the Generating and or Distribution Companies to acquire equipment or to buy meters or to improve what is being paid to electricity generating companies; so that they can continue to pay for their gas and then maintain the system to continue to operate.’’

Last month, the Federal Government alongside Fidelity Bank and AMCON were finalising the process to take over the management of five electricity distribution companies (DisCos) over debts owed Fidelity Bank Plc.

Before then, United Bank for Africa Plc had taken over the majority stake in the Abuja Electricity Distribution Company (AEDC) in December 2021.

As of its Full Year 2021, power and energy made up 9.0 per cent of UBA’s gross loan book of N2.8 trillion, 1.9 per cent of Zenith’s gross loan book of N3.5 trillion and 8.6 per cent of Fidelity’s gross loan book at N1.7 trillion.

Since the conclusion of the power sector privatisation process in 2013, DisCos have remained the weakest link in the electricity value chain as they have been grappling with enormous operational challenges.

According to CSL Stockbrokers Limited, the most obvious is the perennial issue of the lack of cost-reflective tariff, a condition that has hindered their ability to fulfill financial obligations to the Nigeria Bulk Electricity Trading (NBET) Company, leading to its default on contractual obligation to the Generating Companies (GenCos).

“The overall impact is that the power sector has continually suffered a cash crunch, that has literarily forced government to inject funds to avert a total collapse. But despite a series of government interventions, the problems in the power sector have persisted. Although we acknowledge that the challenges in the nation’s power sector run across the entire value chain, we believe the distribution companies are the most troubled. In 2019, there were reports of plans by the government to repossess 10 electricity distribution firms as one of the options to rescue the nation’s troubled electricity industry.

This was expected to cost $2.4 billion. The core investors paid over $1.3 billion for 60 per cent equity in each of the 11 Discos.

OduNews on Google News

Submit press release, news tips to us: tips@latestnaija.news | Follow us @ODUNewsNG 

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More