The World Bank Group will finance Nigeria’s power sector reforms in a move widely hailed as the group’s biggest financing programme in the world.
Bernard Sheahan, the Director, Infrastructure Department, International Finance Corporation (IFC), a subsidiary of the World Bank Group, speaking at the recently held power summit in Lagos, said the World Bank planned to provide financing for a number of the power projects, such as providing funding for some of the transmission cost and guaranteeing some of the risks in the sector.
“The Partial Risk Guarantee programme that the World Bank is planning for Nigeria will be the largest of such programme anywhere in the world,” he said. “This integrated business plan for the power sector by the World Bank Group is something we have never tried anywhere else. We are doing this because of the magnitude of the needs here and we think the potential payoff, both for Nigeria and for opening up a really important market for investors.”
Mr Sheahan said that the IFC is already in discussion with the Federal Government of Nigeria, on how best to set up the next stage of the power reforms programme; adding that the IFC has started disbursing some money as co-developers to one of the first Independent Power Projects (IPPs), with the hope of bringing the project to financial closure soonest.
He said that in the past, the role of the IFC and other agencies of the World Bank, was mainly advisory, adding that at the moment, they are moving into the financing phase, through the IPPs and eventually some of the distribution companies, as well. He expressed support for the tariff system, saying it is a critical part of a system intending to grow that will ensure transparency and will enable the distribution companies to generate enough cash to expand their network and grow capacity.
“What this reform has done for the government is the credibility which was not there before,” he said. “Credibility, which was why many people sat on the side-lines and not much happened, where efforts were made to develop the independent power plants and it did not get very far. Whereas now, we see the payments that had been made for the discos, which are quite remarkable.
The big difference is the perception and momentum, not because everything has been solved, but enough have been solved that people are willing to put serious money and that is because the government has succeeded in putting together more of these pieces in a whole that become credible that has been the case before. Officially, tariffs are quite low, but effectively, the prices that are being paid for power here in Nigeria is higher than the amount paid in any other country in the world, because of self-generation. I believe Nigeria is the world leader in self-generation.”
