W/Bank to Disburse Approved $750m Nigeria’s Power Sector Fund in 2021
The World Bank has said that it would start the disbursement of the $750 million it approved for Nigeria’s Power Sector Recovery Programme (PSRP) next year and complete the exercise in 2023.
Nigeria’s Power Sector Recovery Programme is designed to improve the reliability of electricity supply, financial sustainability, as well as enhance accountability in the country’s power sector.
The World Bank said in a recent document that it would not pay out any money from the fund in 2020.
According to the programme, it would start disbursement in 2021 with $426 million, while the sum of $162 million would be disbursed each in 2022 and 2023 respectively, to bring the total to $750 million.
With the government’s revenue projected to drop by three per cent of the country’s Gross Domestic Product (GDP) or more in 2020, the World Bank said it is expected that Nigeria would experience some fiscal pressure, necessitating urgent reforms in its power sector.
It said also that the programme would help the government redirect large fiscal resources from regressive power tariffs subsidies towards critical crisis-responsive and pro-poor expenditures.
The multilateral institution said in 2019, Nigeria’s electricity tariff shortfalls reached N524 billion or $1.72 billion, equivalent to 0.4% 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,” the World Bank said.
Additionally, it noted 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 per cent of GDP.”
Nigeria ranks 131 with respect to the overall ease of doing business in World Bank’s 2020 assessment, with getting access to electricity ranked as one of the major constraints. With regards to clear-cut objectives of the scheme, the bank stated that it has three-Programme Development Objectives (PDO) for it.
They include an increase in annual electricity supplied to the distribution grid; decrease in annual tariff shortfalls, and that the new tariff shortfalls should be funded from non-Central Bank of Nigeria (CBN) sources once its Payment Assurance Fund (PAF) is depleted.
It also requested that public awareness about the ongoing power sector reforms and performance increases.
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.”
By Chibisi Ohakah, Abuja