Central Bank Nigeria cracks the whip

Power sector
While the monetary tightening and other regulatory policies intensify, banks are leveraging on key reforms in the economy to make up for lost revenues.

Oluwole Abegunde, managing director, Meristem Securities, said power sector reforms are expected to trigger an influx of investments from both local and international investors, which means more business for the banks.

He said the World Bank has indicated its interest in investing $1bn in the power sector and the government has signed an agreement worth a total of $1.3bn with Chinese firms to build power plants in the country.

General Electric (GE) has approved a $1bn deal with the government, starting with $250m, with the balance spread over five years, in a multi-model service and manufacturing facility in Rivers State. This will make Nigeria a hub for servicing GE turbine generating machines in Africa.

MTN Nigeria also obtained a $3bn syndicated loan involving 17 Nigerian and seven foreign banks, intended to enhance its infrastructure and service delivery in the country. Abegunde says banks are taking full advantage of these investments. He expects the impact of these investments to be sizeable on GDP this year and should contribute to shifting the growth curve upwards.

There have also been other commitments by banks in the power sector. Mainstream Energy Solutions has signed a $170m Medium Term Syndicated Acquisition Facility. It was for part-financing the concessions on Jebba Power Station and Kainji Power Station, both owned by Kainji Hydro Electric. The syndication was fully underwritten by Guaranty Trust Bank, which also acted as the mandated lead arranger. Africa Finance Corporation acted as Co-Mandated Lead Arranger. The concession for Kainji Hydro Electric, one of the 18 unbundled successor companies of the Power Holding Company of Nigeria, was awarded to Mainstream Energy Solutions under the privatisation process and incorporates the right to design, construct, operate and maintain the two power plants.

Segun Agbaje, CEO of Guaranty Trust Bank, says that the financing underpins the bank’s belief in, and support for, the long-term growth of the company, and by extension, the growth of the Nigerian power sector to further catalyse the Nigerian economy.

The United Bank for Africa (UBA) extended $700m in funding to various investors for the acquisition of power assets in the recently privatised power sector. Managing director Phillips Oduoza says,“It is a growth sector we are playing very big.”

Zenith Bank said it expects to increase loans to the privatised power companies. Its loans to the power sector may rise to 10% of the bank’s loan book this year, up from 4.3% in the third quarter and 1.3% at the end of June last year. It gave loans to companies including Eko Electricity Distribution Company and Ikeja Electricity Distribution Company.