The federal government has approved the sum of N701billion as Power Assurance Guarantee for the Nigeria Bulk Electricity Trading (NBET).
Briefing State House correspondents after the Federal Executive Council (FEC) meeting chaired by the Acting President, Prof Yemi Osinbajo, the Minister of Power, Works and Housing, Babatunde Fashola, said the facility would be made available by the Central Bank of Nigeria (CBN).
This, according to him, is to guarantee payment for the evacuation of electricity produced by Generation Companies (GenCos) to the national grid.
The minister said the amount would be drawn on a monthly basis to tackle the liquidity challenges faced by Gencos, noting that part of the liquidity problem faced by GenCos was the inability to pay their gas suppliers.
He pointed out that NBET would pay Gencos in arrears of electricity generated as a deliberate step to improve their confidence and that of intending investors in the sector.
He said: “The second memorandum is in another area of critical importance which is power. Part of the challenges that were addressed in the memo that was presented to council to solve some of the liquidity problems, especially as it relates to NBET.
“NBET, as you know, is the government’s own company. That is the bulk electricity trader who buys power from the Gencos. The liquidity problems that have characterised the market have affected NBET’s ability to deliver on its PPP obligations through the Gencos. So, going forward in order to strengthen NBET, CBN is proving a payment assurance guarantee for any energy produced by any Gencos, so that the Gencos can pay their gas suppliers when they get paid. So that the hydros can continue to operate.
“What we seek to achieve here is to bring some stability to the production side of the power value chain and also give confidence to investors who want to come in; who are concerned about how to recover their money. Payment assurance and also people who are planning to invest in the gas sector which is being championed by the ministry of petroleum also are saying the same thing in terms of payment for gas produced.”
He said the approval given by FEC was to provide this guarantee for NBET which he said, was a one hundred per cent government-owned company to pay on a monthly basis its obligations for energy actually produced on to the grid to the Gencos that were its customers.
Explaining further, he said: “The reality is that we want more power and for that reason we are expanding our transmission capacity regularly. I have been here to announce to you transmission projects that have been approved by council and over the last one year plus the transmission capacity has grown to almost seven thousand from fie thousand and is continuing to grow with every project.
“So, it is not the problem of taking power, it is actually a problem of getting power from generation. If you recall, just about a few weeks ago, you were reporting that power supply had dropped to a little over 2000mw. It is back now at over 4,000mw. We have solved the transmission problem in Ikot Ekpene largely to evacuate over a thousand. But the gas suppliers were being owed so they were not supplying gas for the power producers.
Fashola said the quantum of the guarantee was for two years from January this year right through to December 2018.
“It is capped at a maximum of N701billion but it is to be drawn monthly. It is possible it may not reach that. But we are projected on the total cost that NBET will likely to pay,” he added.
He explained: “So, if the power generated does not meet that cost we don’t pay for it. It is paid in arrears at the end of the month not in advance. So, it is for actually what gets unto the grid. And this is part of the reforms that we have briefed you about that we were planning to undertake.”
During the briefing on Wednesday, the Minister of Agriculture, Audu Ogbeh, said FEC had approved the sum of N263 million for three research institutions to produce Arabic gum seedlings for Nigerian farmers and for export.
He said Nigeria earned as much as $43 million from export of gum Arabic last year, and that more would be earned with increased production, especially now that the commodity was in high demand in 17 other countries.
Ogbeh disclosed that similar efforts were on to boost cassava production, even as he described as “interesting” the recent discovery of well-packaged ‘garri’ imported from India.