Nigeria: Govt Negotiates New Supply Terms With Benin, Niger Republics

22 July 2019

Abuja — The federal government has renegotiated new terms for the supply of electricity to the neighbouring West African countries of Benin and Niger Republics, THISDAY has learnt.

THISDAY gathered that the renegotiation, which was consummated by the Nigerian Bulk Electricity Trading Plc (NBET), was to ensure that the international sale of electricity by Nigeria to the Société Nigérienne d'Electricité (NIGELEC) and Communauté Électrique du Bénin (Togo/Benin Bi-national Electricity Company) (CEB), reflected appropriate commercial terms.

According to a document signed by the NBET's Managing Director, Dr. Marilyn Amobi, and addressed to President Muhammadu Buhari, which was sighted by THISDAY at the weekend, the agency said it had concluded the negotiation with NIGELEC and CEB.

The negotiation, it was learnt, reportedly centered on appropriate commercial terms for sale of electricity to NIGELEC and CEB under the cost of service and price cap-based incentive regulation mechanism the Nigerian Electricity Regulatory Commission (NERC) uses to set the revenue requirement for grid electricity users.

Nigeria, under a bilateral agreement, sells electricity to NIGELEC and CEB daily, albeit on terms that are not commercial.

The two international customers have also reportedly owed the country for such supplies, that is, always failing to pay up promptly and thus accumulating payment backlogs.

The new terms for sale of electricity to the countries, it was learnt, reflected more favourable commercial terms than the current regulatory prices.

NBET also stated that the new terms reflected the existing structural and governance regime in Nigeria's electricity market.

In 2017, the NBET concluded and executed the renovation agreement with the liquidator of defunct Power Holding Company of Nigeria (PHCN), and subsequently took over the management and administration of the international sale of electricity.

Notwithstanding its taking over of the transactions and renegotiating the terms, it said it still did not get paid by the international customers because the Transmission Company of Nigeria (TCN) allegedly used a supposed presidential directive to receive and disburse the money to market participants.

NBET boss also added that a $350 million loan the agency got from the federal government in July 2014 when it issued a $1 billion Eurobond was fully repaid to the Debt Management Office (DMO) in June 2018.

Amobi indicated that the value of the one-year bank guarantees requested from the 11 electricity distribution companies (Discos) in the market in support of their vesting contracts with the NBET has gone up to N70.7 billion after Abuja and Kaduna Discos finally credited theirs in 2018.

With regards to the $350 million Eurobond loan repayment, Amobi, said it being a term loan, the NBET repaid it in 2018 with interest to DMO.

This, according to her, also meant it did not use it for other purposes outside of its original mandate.

To ensure effective utilisation of the $350 million loan, NBET signed an agreement with the Nigeria Sovereign Investment Authority (NSIA) to manage the fund in a manner that would allow it yield returns.

The fund is also expected to be made available for any of NBET's required interventions in the electricity market. The NSIA reportedly managed the funds and earned some interest for the NBET to offset some of the interest payments on the loan.

NBET also disclosed that the N16 billion from the sale of Egbin power plant, which it keeps in an escrow account, has not been misappropriated as thought, adding that despite pressures from various quarters for the fund to be spent on several proposed projects in the sector, it kept it intact as expected by the National Council on Privatisation (NCP).

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