The Federal Executive Council (FEC) Wednesday ratified President Muhammadu Buhari’s anticipatory approval for the release of N8,648,081,465 to fund phase one of the Nigeria-Germany electricity deal.
The fund, which is an offshore loan facility of €15.21 million, an equivalent of N6,940,081,465.20, and N1.708 billion onshore fund, is meant for counterpart funding “of the end-to-end grid modernisation and expansion programme” in the power sector.
The approval, which was a sequel to the 2018 power deal between Nigeria and Siemens AG of Germany followed the agreement signed between the two parties.
The loan will be drawn from a German consortium with a guarantee provided by the German government through Euler Hermes to finance Nigeria’s power expansion programme.
Briefing reporters after the FEC meeting in the State House, Abuja, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said FEC’s approval followed the presentation of a memorandum of understanding (MoU) by both the finance ministry and the Ministry of Power.
Earlier in July 2019, the federal government and Siemens had signed a letter of agreement on Nigerian electrification roadmap as a follow-up to a meeting between Buhari and the German Chancellor, Ms. Angela Merkel, on August 31, 2018.
Under the scheme, Nigeria is partnering Siemens AG for Nigeria’s electrification project, which has three phases with the overall goal of achieving 25,000 megawatts of electricity in 2025.
According to Ahmed, the anticipatory counterpart funding for the first phase of the project, approved yesterday, would be used to finance 23 transmission initiatives and 175 separate transformative projects.
According to her, the loan is concessional, with two to three years’ moratorium, 12 years of repayment period and 15 per cent of counterpart funding to be provided by the federal government as captured in the revised 2020 budget.
The minister, who said the facility would support the operations of the Nigerian Electricity Regulatory Commission (NERC), added that after obtaining the loan from Germany, the federal government will “unlend” it to electricity distribution companies (Discos) as a convertible loan facility to the Discos.
She said consequently the federal government would collaborate with the Discos to restructure a loan agreement with them when the first phase of the project is implemented.
She said: “Today in council, the Ministers of Finance, Budget and National Planning, Mrs. Zainab Ahmed; and Power, Mr. Saleh Mamman, jointly presented a memo, requesting the council to ratify President Muhammadu Buhari’s anticipatory approval for the release of 15.21 million Euros offshore and N1.708 billion onshore, towards the counterpart funding for the bilateral loan from German consortium guaranteed by the German government through Hurley Hams to finance the implementation of the end to end grid modernisation and expansion programme.
“So, today at council, we discussed stage one of phase one of this project under the presidential power initiative. This project is designed to include 23 transmission initiatives as well as 175 separate transformative projects in the electricity distribution franchises that we have in the country. The project will also support the regulator, Nigerian Electricity Regulatory Commission (NERC), to transit towards a programme of improving metering in the electricity industry in the country.
“Let me remind us as citizens that Mr. President and his German counterpart met in Abuja on 31st August 2018 and committed to jointly increase the capacity of the Nigerian electricity grid from the current capacity of 5,000 megawatts to 25,000 megawatts over a three-phased programme.
“After this meeting, an MoU was executed on July 23, 2019, between the Nigerian government and the Siemens AG with the German government support.
“The MOU is designed to deliver this end-to-end modernisation programme, which we are calling the presidential power initiative. The objective of this presidential power initiative is to address the intractable problems that have bedeviled the Nigerian power industry, over a period of years.
“The project will be implemented in three phases and the subject of our memo today is phase one. The facility for this programme is to be sourced from the German consortium and it would be guaranteed by the German government through Hurley Hams covering 85 percent of the project cost, the highly concessional facility with two to three years moratorium, 12 years loan repayment period with an interest rate of LIBOR plus one per cent to LIBOR plus 1.2 per cent.
“Also, the federal government is to provide 15 per cent counterpart funding as its contribution towards the project. We have a provision in the 2020 appropriation revised for the government’s counterpart funding.
“The federal government is taking the loan from the German government with the plan to unlend this particular loan to the distributing network. So, it’s a convertible loan facility to the Discos and we will be working with the Discos to restructure an appropriate loan agreement as soon as we are able to close out on this initial phase of the process, and council approved and ratified Mr. President’s approval.”