The Central Bank of Nigeria, CBN has offset the N36.9 billon legacy debt owed to gas suppliers by the power sector under the defunct Power Holding Company of Nigeria, PHCN, over the last few years.
This debt settled through the CBN was part of the N213 billion intervention funds initiated by the Federal Government to address the hiccups which characterised the pots-privatisastion of the power sector of the economy. The Minister of Petroleum Resources Mrs. Diezani Alison Madueke, who disclosed this during a signing of the stakeholders’ Memorandum of Understanding, MoU with the Federal Government in Abuja, explained the intervention was initiated to move the sector forward.
According to her, “In the last few weeks, the CBN, NERC and Federal Ministries of Petroleum as well as Power, have been collaborating to develop lasting solutions to the challenge of gas supply. The interventions started with an increase in gas to power price to levels considered more commercial than before and at par with export parity. Gas transmission tariff for gas supplied to power was also increased to reflect commercial rates and enable private investment in infrastructure.
Mrs. Alison Madueke recalling said, “In our last press engagement, a further intervention aimed at addressing legacy debt owed to the gas sector was also announced “Today, I am pleased that we are formally consummating our last intervention. Legacy debt of about N36.9bn owed to gas suppliers by the power sector (PHCN) over the last few years is now being settled through the CBN led intervention scheme”
She noted further that, “With this intervention, all undisputed claims are settled creating a new page in the Nigerian domestic gas market. Going forward, it is expected that appropriate security mechanisms will be put in place to assure that gas sold to the power sector, gets paid for, thereby creating a viable and sustainable gas sector “Let me add however, that today’s intervention is also complimented by a reciprocal commitment by the gas suppliers. A medium term gas supply commitment from the various gas suppliers is also being made today. Today’s commitment will bring to the grid, an additional 2.5 billion cubic feet per day of gas over the period from now till 2017. Over 80% of this will go to the power sector supporting an additional 5-6 GW relative to today’s capacity “Let me assure on short term progress in gas supply too. Today, the Utorogu/Ughelli gas plant is producing at its highest level as production ramps up from about 350mmcf/d a few months ago to over 400mmcf/d currently.
“We are also making good progress in the construction of the bypass gas pipeline to Alaoji. This will add almost 100mmcf/d of gas to power Alaoji and Calabar IPP before the end of December. In addition supply to Gbaran IPP is also being finalized for readiness before the end of December.
“With these projects, the target of 5000MW by the end of December will be met, from a gas availability perspective. Other supply projects are also progressing and expected to add over 150mmcf/ d within 4-5 weeks of the end of December.”
In his remarks, the CBN governor Godwin Emefiele, said that the MoU signalled the collaboration efforts among the Ministry of Petroleum Resources, Ministry of Power and Nigerian Electricity Regulatory Commission NERC to intervene in the Nigerian electricity supply industry NESI with a view to resolving its liquidity challenges.
He said that other power sector value chain players must also agree to specific service related commitments which include the following: Gas Suppliers to commit to assured gas supply at higher volumes; Generating companies GENCOs and Distribution Companies DISCOs to commit to utilizing the funds for equipment/infrastructure acquisition, refurbishment and/or upgrade.
According to him, “all parties will also be subject to additional oversight mechanism to be developed by NERC and CBN to ensure business continuity and that all power sector players meet obligations that are critical for continued electricity supply”.
