The minister of finance, budget and planning, Zainab Ahmed, said that the N1.3 trillion intervention fund the federal government provided for the power sector has not yielded any significant result.
On March 1, 2017, the federal government had approved the sum of N701 billion as a power assurance guarantee fund for the Nigerian Bulk Electricity Trader (NBET) to pay for the electricity produced by the generation companies (GenCos) to the national grid for the period of two years.
The fund was provided to tackle the monthly liquidity challenges faced by GenCos, as the distribution companies (DisCos) keep defaulting in paying for the monthly invoice of electricity received.
In a letter to President Muhammadu Buhari dated November 19, 2021, Zainab Ahmed, minister of finance, detailed how funds can be raised through the sale of make-up gas to address the financial challenges in the sector
.“The industry requires N85 billion per month to pay for gas, generation, transmission and distribution operations,” the minister wrote.“Recent intervention (between 2017-2019) towards addressing the power sector problem includes the 701 billion and 600 billion payment assurance facilities (PAFs) secure from Central Bank of Nigeria (CBN) to take care of some of the FG contingent liabilities within the sector and which have not yielded significant result.
“Shortfalls caused by the large difference between allowed tariffs and what is required for cost recovery cost the FGN a total sum of N1.249 Billion between 2017 to 2019. These resources are more needed for human capital development and infrastructural investment. The above includes some projects like the World Bank loan (up to $3 billion) for tariff shortfall and the euro 2.6 billion for the presidential power initiative is considered to support Nigerian Electricity Supply Industries (NESI).”
The minister also stated how Nigeria paid $137 million in two years for gas and electricity that were never used in the “take or pay deal” the country entered into with some investors in the power sector.