W’Bank Starts $750m Power Support Fund Disbursement in 2021

By Chineme Okafor

World Bank has disclosed that it would begin the disbursement of the $750 million it approved for Nigeria’s Power Sector Recovery Programme (PSRP) next year and complete the process in 2023.

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.

In a document containing its implementation plan for the programme, which was obtained by THISDAY, the bank explained that it would not pay out any money from the fund in 2020.

It revealed that it would start disbursement in 2021 with $426 million and $162 million would be disbursed in 2022 and 2023 respectively, to bring the total to $750 million.

The bank’s document also projected that with the government’s revenue projected to drop by three per cent of the country’s Gross Domestic Product (GDP) or more in 2020, Nigeria would experience some fiscal pressure, necessitating urgent reforms in the country’s power sector.

According to the multilateral development institution, the programme would help the government redirect large fiscal resources from regressive power tariffs subsidies towards critical crisis-responsive and pro-poor expenditures.

It explained that in 2019, Nigeria’s electricity tariff shortfalls reached N524 billion or $1.72 billion, equivalent to 0.4 per cent 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.

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.

It further stated that: “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,” 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.

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.

“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.