The Central Bank of Nigeria (CBN) says its interest in the energy sector is to use monetary policy to fasttrack economic growth and create jobs.
The CBN Governor, Malam Lamido Sanusi Lamido, said this on Thursday in Lagos in a paper entitled: â€œFunding of Power Projects: The Role of CBNâ€ at a conference organised by the National Association of Energy Correspondents.
Lamido, represented by Dr Kingsley Moghalu, the Deputy Governor on Financial System Stability, said such was to ensure that Nigeria had an electricity supply industry that could meet the needs of its citizens. He said that it was in also tandem with the objectives of the National Electricity Power Policy (NEPP) to improve efficiency and affordability of power supply and to encourage private sector participation and competition.
Lamido said that the N300 billion intervention fund for the Energy and Aviation sector was to catalyse financing of the real sector of the Nigerian economy such as power and other economic infrastructure.
According to him, this will attract the much needed private sector investment and promote employment generating growth in the country. He explained that the fund would be channelled through the Bank of Industry (BOI) for on-lending to the Deposit Monetary Banks (DMB) at a maximum interest rate of 1.0 per cent for disbursement to power projects.
It will carry a tenor of 10-15 year at concessionary interest rate of not more than 7.0 per cent. Lamido said that the Africa Finance Corporation (AFC) was appointed to serve as the Technical Adviser on the power sector.
The objective of the fund, he noted, was to improve power supply, power generation as well as provide leverage for additional private sector investments in the power sector. Lamido said that under the project-based eligibility criteria, the power promoters wishing to access financing under the programme would need to demonstrate their capability of paying the principal and interests as contracted with the lenders.The governor said that the sector was in dire need of reforms that would create an enabling environment for the private sector to invest in translating the natural gas resources into power.
â€œEstablishing an appropriate, incentive-based pricing regime for gas-to-power products is the key that will unlock private investment. Banks need to be able to finance power infrastructure and other areas of the real economy if they are to avoid asset bubbles that can lead to banking crisis,â€ Lamido rermarked.