World Bank to delay disbursement of $750 mln facilities on power till 2021
The World Bank said it will delay the disbursement of the $750 million facilities to support Nigeria’s Power Sector Recovery Programme (PSRP) till next year and complete the process in 2023.
In a document containing its implementation plan for the programme, the bank said no money from the facilities will be released in 2020.
PSRP is expected to improve the reliability of electricity supply, achieve financial sustainability, as well as enhance accountability in Nigeria’s power sector, which is currently riddled with governance and process challenges.
The global bank said it would release $426 million from the approved facilities in 2021, another $426 million the following year and the last tranche of $162 million would be disbursed 2023.
The bank anticipates a major reform in the country’s power sector as it projected a three percent drop in government revenue project this year, this would also put pressure on the government fiscal policy.
It said the aims of the bank support programme was to help Nigeria redirect large fiscal resources from regressive power tariffs subsidies towards critical crisis-responsive and pro-poor expenditures.
Nigeria’s electricity tariff shortfalls reached N524 billion or $1.72 billion, equivalent to 0.4 percent of her GDP and more than N428 billion spent on health care delivery.
“The federal government financing gap in 2020 is currently estimated at $8.1 billion and it would increase by $1.0 billion in the absence of implementation of Power Sector Recovery Programme (PSRP) and Power Sector Recovery Operation (PSRO).
“In addition, the sector recovery efforts focused on ensuring regulatory and policy predictability, providing incentives for efficiency in operations, while enforcing payment discipline across the supply chain are critical for maintaining the ‘lights on’ through the continued generation of electricity,” said the bank.
The World Bank said that improving power sector performance would be central to unlocking economic growth, particularly in the non-oil sectors of manufacturing and services during the recovery process.
“The annual economic losses caused by Nigeria’s unreliable power supply have been estimated at N10.1 trillion or about two percent of GDP,” adding that the country ranks 131 with respect to the overall ease of doing business in its 2020 assessment, with getting access to electricity ranked as one of the major constraints.
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The bank said while a multi-layer of implementation processes would be adopted for the programme, Nigerian Electricity Regulatory Commission (NERC) and Nigerian Bulk Electricity Trading Plc (NBET) would, however, be its top implementation agencies.
“Successful implementation of PSRP and PSRO requires robust governance and implementation arrangements, given the complex inter-agency dependencies of many of PSRP interventions and the need for change behaviours in key MDAs.
“As the bulk trader purchasing electricity from Gencos and selling it to Discos, NBET will be the entity receiving different sources of funds to execute the approved financing plan i.e. make regular (monthly) payments to Gencos for the tariff shortfall portion of the Gencos invoices (both new and historical arrears) and make CBN debt service payments.
“NBET has to follow predefined agreed protocols – little discretion will be allowed – in deciding how best to use the different sources of funds to make payments to the different uses of funds. NBET will report back on the execution of the financing plan to PSRP Secretariat and DG Budget,” it stated.