The Minister of Finance, Mrs. Kemi Adeosun, on Friday said that contrary to some reports in a section of the media, the Power Purchase Agreements signed by the Federal Government with project developers in the power sector had not been cancelled.
Adeosun said this in a statement issued by her Media Adviser, Mr. Oluyinka Akintunde.
She explained that the role of negotiating with the project developers and signing the PPAs was domiciled with the Nigerian Bulk Electricity Trading Plc and not the Federal Ministry of Finance.
The minister added that as the primary obligor of all forms of guarantees issued by all governments of the federation and their agencies, the Federal Ministry of Finance, through the Debt Management Office, must estimate the size of the obligation that it was willing and able to accommodate in relation to the power sector.
In doing so, Adeosun stated that the ministry was required to evaluate the country’s repayment capacity for current and contingent debt obligations as part of its debt sustainability analysis.
The debt sustainability analysis, according to her, is a key requirement for sound public debt management practice.
These liabilities, she added, had wider implications for the country’s debt and overall fiscal position in the medium to long-term.
In view of this, she said the ministry initiated an inter-ministerial meeting with all representatives from the DMO; Ministry of Power, Works and Housing; Nigerian Bulk Electricity Trading Plc and Bureau of Public Enterprises.
She explained that during the meeting, it was agreed that the Federal Government would bear the foreign exchange rate risk and make termination payments in dollars; while the NBET was required to work within a contingent liability exposure limit of $10bn.
Adeosun added that it was agreed that the NBET would negotiate with the project developers to ensure that Nigerians would get the best quality of service within costs aligned to global standards.
The statement read in part, “The Federal Ministry of Finance is focused on achieving market sustainability in the long-term and requires that the NBET has a comprehensive plan to manage these exposures to avoid a drawdown on the PRGs.
“It is imperative that the Federal Ministry of Power, Nigerian Electricity Regulatory Commission, and the NBET must ensure that meters are rolled out to improve billing accuracy and also improve distribution companies’ collections in order to increase cash flows to the power sector value chain.
“If the market cannot pay for power distributed, the situation will remain unsustainable.
“It is unhealthy for the Federal Government of Nigeria to build an entire sector based on sovereign guarantees without simultaneously addressing key challenges inhibiting financial sustainability across the value chain.”
The statement added, “It should also be noted that no multilateral agency will continue to issue guarantees where it is clear that the requirement for steady cash flows within the sector to meet regular payment obligations does not exist.
“The Minister of Finance wishes to also place on record that the Federal Government is very willing to accept investments that are accretive in value to the Nigerian economy on a holistic basis.”