The Group Managing Director/Chief Executive Officer, CFL Group of Companies, Mr. Lai Omotola, has faulted the increase in electricity tariff and the process leading to the handover of power firms to private investors.
Omotola, who is the publisher and editor-in-chief of InfraWatch Nigeria Limited, claimed that the tariff hike was meant to enable the power firms to settle the debts owed to banks.
He said, “The new tariff regime will not produce the desired result the way the Minister of Power, Mr. Babatunde Fashola, has painted it. The reasons are not far-fetched.
“The reasons really border on two main factors. One is the technical capacity of our indigenous companies as it were today. Two is the financial capacity of the indigenous companies to bring together necessary infrastructure that can guarantee steady supply of electricity in the country.”
Omotola noted that majority of the funds used in acquiring the power assets were provided by Nigerian banks.
He said, “In 2013, the Federal Government and the Bureau of Public Enterprises raked in a sum of $2.6bn. I can say about 80 per cent of the fund was provided by the Nigerian banks.
“Ordinarily, it should not be that way because foreign investors are primarily supposed to bring majority of their own equities in terms of the capital mix, where you find investors bring at least 60 per cent equity.”
He said the debt owed by the power firms was now creating a little bit of pressure on the nation’s financial system.
“There are two factors with the Nigerian banks. One is the high-interest rate. Two is the tenure of their funds. These two factors cannot successfully finance the electricity industry. They can only act as working capital incentive. What we find today is that the Nigerian banks financed in dollars-dominated terms.
“Already, interest rate has gone up. The value of dollar to naira had doubled over the space of two years. The resultant effect, if the truth must be told, is that the accounts of our indigenous companies are not doing well in the banks.”
Omotola said the ability of the power firms to pay the loans was being threatened.
“The Federal Government understands that there is a financial problem. The government also understands that the problem was actually created by the inability of these indigenous investors to generate adequate funding that the electricity industry really requires.”