The federal government is looking at initiating a treasury bond to the tune of N300 billion to improve funding in Nigeria’s electricity market.
It was gathered from two industry sources who are conversant with the development that the proposed treasury bond would seek to address the prevalent operational challenges the 11 electricity distribution companies (Discos) face.
The Discos, the sources said, are not charging consumers cost-reflective rates for electricity supplied to them, and the government is also not willing to provide some sort of subsidy to cushion their revenue shortfalls as reportedly agreed with them during the power privatisation exercise.
This development they said means that they were under-paying the Gencos for power supplied to them, as well as contending with lots of challenges sourcing for good monies to invest in expansion of their networks.
They added that they are also unable to undertake other planned investments that may include sourcing for alternative power outside of the national grid for their customers, hence, the government’s decision to float the market driven bond.
Speaking further, the sources explained that the bond is expected to be captured in the government’s financial plan for 2016 and also guaranteed by it.
They explained that it would majorly target to have the country’s N5.3 trillion worth pension fund invest in it with established terms on returns.
Operators in the country’s pension industry had said the huge fund would not be deployed into the country’s power sector unless it has a structured product to consider. The sources noted that the bond would be one of such structured products that the fund could consider. They also said it would be open for other classes of subscribers.
Also, the Nigerian Bulk Electricity Trading Plc (NBET), an agency of the government, which procures bulk electricity on behalf of the Discos, is expected to manage the bond.
The Discos have reportedly failed to consistently pay to NBET 100 per cent value of the power they bought from generation companies (Gencos). The bond will in this regard help to bridge these gaps and also give them the opportunity to do their capital expenditures.
According to the sources, the decision to establish the bond was initially mulled by the executive arm of government who had considered the financial challenges of operators in the power sector and thought that it would be better to set up such long-term bond where good funds could be pulled up for them and guaranteed by it.
Thisday