POWER “The debt service obligations for the CBN PAF is a significant fiscal burden on FGN, at N198 billion (US$550 million) per year from 2020 to 2027 per the original agreed term-sheet. The original PAF was unconditional and was used by NBET to supplement the remittances of Discos and ensure at least 80 per cent payment to Gencos.” “The PAF expansion (approved by the FGN in May 2019) is conditional and underpinned by an accountability framework. Power sector shortfalls are rising and are fiscally unsustainable. From 2015 to 2019, the tariff shortfalls – the difference between allowed tariffs and cost-reflective tariffs, which the FGN is responsible for funding, increased significantly as allowed tariffs stayed flat while the costreflective tariff increased due to FX depreciation and inflation.
“In 2019, with tariffs at only 56 per cent of cost-reflective levels, the annual tariff shortfall was estimated at N524 billion (US$1,718 million). Tariff shortfalls between 2017- 2019 totalled N1,249 billion (N1.2 trillion). This situation is not fiscally sustainable and takes away resources for human and physical capital investment – in 2019 the FGN budget was only N428 billion (US$1,403 million) for health and N650 billion (US$2,131 million) for education,” it added. The Bank equally stated that it has identified risks that could derail the implementation of the PSRP, and which include political and governance, macroeconomic, sector strategies and policies, institutional capacity for implementation and sustainability, as well as stakeholders and operational risks associated with distribution constraints.
According to it: “Macroeconomic risk is rated high, as a result of the significant uncertainty over key macro-fiscal parameters and the heightened macro risks related to COVID-19. In 2020, COVID-19, decline in oil prices and the projected economic downturn for Nigeria will likely further aggravate the precarious financial situation of the power sector making it challenging to implement the PSRP financing plan. “Op erational risk linked to distribution constraints is rated high. The program’s objectives will not be achieved if the existing constraints in the distribution segment are not addressed. The program thus has a strong focus to incentivize improved performance by Discos and to strengthen regulatory oversight and accountability.”
DisCos to Repay CBN N9.96bn Debt in Four Months
E
lectricity distribution companies in the country are expected to repay in four months N9.96bn of the debts owed to the Central Bank of Nigeria, according to Punch.. In September 2014, about a year after the privatisation of the power sector, the CBN introduced a
N213bn intervention fund, called the Nigeria Electricity Market Stabilisation Facility (NEMSF). The NEMSF, a loan facility with a 10year repayment period, was meant to assist the generation companies and the Discos to settle legacy gas debts, execute agreed metering and maintenance programmes,
and finance procurement of transformers and other equipment. The Nigerian Electricity Regulatory Commission, in its Multi-Year Tariff Order 2020 for the Discos, gave the power firms minimum remittance thresholds with respect to the CBN loan.
Majorwaves Energy Report OCTOBER 2020, Vol 3 No 10
41
