The global financial crunch has forced countries, including Nigeria, to look for alternative sources of funds for their projects.

In this regard, the Ministry of Finance, the Central Bank of Nigeria, CBN, and the Debt Management Office, DMO, are concluding arrangements to use part of the over N1trillion investible funds accruable from the national pension scheme, to boost power sector development.

The Partner, CPCS Transcom, Mr. Arif Mohiuddin, a consultant engaged by the Federal Government on power privatisation, said recently in London that the move is in “recognition of the limitations of the international financial market over the next few years.”

As a result, he said government and the CBN are working out an arrangement to invest the pension fund in power.

However, due to the fears expressed by pension fund managers over in view of the high risks involved in such a venture, Mohiuddin, government was also working out modalities for guarantees for the fund.

Specifically, he noted that investors were particularly afraid of the risks involved in Transmissions since it remains under government’s hold, and how this will play out when producers give power to the distribution companies.

Already, it has been admitted that more than 40 percent or about 1,500 mega watts of the electricity generated in the country are lost to technical glitches between transmissions and distributions, which is causes a big scare for investors.

“What we have done is to work out an arrangement where the tariff captures the debts. We are discussing with the Ministry of Finance and the CBN to ensure that investors recoup their investments,” Mohiuddin.

Explaining further, the Minister of Power, Prof. Bart Nnaji, told Sweetcrude that investing the Pension funds is not a new phenomenon, as it was the practice ion some nations of the world, because the fund is always a secure fund.

According to him, “It is important for all to understand that the plan is not just to put the money in power without securing it. First, the fund has to be guaranteed.”

Besides, he elaborated, “Only a percentage of the fund will be used. You also have transmissions use and service charges which the money can fund.”

He argued that globally, the practice is to invest pension funds in secure instruments, adding that power is one of such, so the pension fund is very secure.

He also noted that investments in power will be done through private equity, adding that there was already a $120billion available to investors for this purpose.

He, however, reiterated that “government is not providing sovereign guaranty for power but took the equivalent of a partial risk guarantee for power, the regulatory certainty and distribution terms as well as political risks guarantees.”

In view of the incidence of gas supply shortages, and attendant poor power supply situation in the country, a similar guarantee has been worked out for gas producers to ensure they are paid for whatever gas they give to the power sector.