The N50 billion power sector risk guarantee escrow accounts kept by the Nigerian Government in three commercial banks are intact, the Bureau of Public Enterprises (BPE) and the Nigerian Bulk Electricity Trader (NBET) said on Monday.
The Director General of BPE, Benjamin Dikki, and the Managing Director of NBET, Rumundaka Wonodi, were speaking against the background of speculations that huge interest yields on the escrow accounts have been diverted.
The N50 billion, which was taken out of the total N59.55 bn proceeds from the sale of Egbin Power plant, was shared in the ratio of 60:20:20 and deposited in three escrow accounts in favour of the NBET since December 2013 for an unbroken period of three years.
The sum of N30 billion was invested in First City Monument Bank (FCMB), while N10 bn each was deposited in United Bank for Africa (UBA) and First Bank of Nigeria (FBN).
“At the moment, investment in the three escrow accounts is intact,” Mr. Dikki said in a telephone interview. “BPE is not aware of any payments or disbursements from those accounts for any purpose.”
“At the end of the five years period when the power sector has stabilised, and the distribution companies have reduced the technical and financial losses in their operations, whatever balances would be left in the accounts, including interests, would be returned to BPE and the National Council on Privatization (NCP),” he said.
Mr. Dikki, however, refused to provide details on the terms and conditions of the escrow accounts, particularly the interest rates on the accounts.
Mr. Wonodi, who also spoke on phone with PREMIUM TIMES, confirmed that no kobo of the monies has been utilised, as there was no need for an intervention, with country only entering the transitional phase of its electricity market only recently.
On the rationale behind the escrow accounts, the head of BPE said following the failure of the World Bank to come through with its proposal to support the privatization of the Power Holding Company of Nigeria (PHCN) successor power distribution companies, the government had to look for alternative solutions.
He recalled that when the privatization of successor companies were structured, indications were that the power distribution networks were losing 40 to 50% of the power generated through technical losses in transmission and distribution lines.
The N50 billion escrow accounts managed by NBET, Mr. Dikki explained, was meant to reassure power generation companies that in case the distribution companies were unable to collect all the money from the power generated, the escrow account would be there to assure them of payment for electricity generated, irrespective of what happens with the networks.
The escrow accounts, the Managing of NBET said, were actually for the benefit of the power generation companies that signed power purchase agreements at the end of the privatization exercise to secure bulk trader’s payment obligations.
On alleged illegal directive by the BPE to convert into Naira the $10.11 million in NBET escrow accounts in Diamond Bank in respect of Omotosho and Olorunsogo power plants’ sales, Mr. Dikki said the directive was in line with recent decision of the Central Bank of Nigeria (CBN) to ban all transactions in dollar in Nigeria.
“Nigeria is a Naira denominated country. With the recent decision by the CBN to ban all transactions in dollar in Nigeria, for the money in the escrow accounts to be put into transactions here in Nigeria, the money has to be in the Nigerian currency. There was nothing illegal about the directive,” he said
Chairman, Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, told PREMIUM TIMES, there was nothing illegal about putting the money in the escrow accounts, pointing out that in the absence of the World Bank’s partial risk guarantee, it was necessary to ensure that necessary steps were taken to guarantee uninterrupted power generation.