THE Goodluck Jonathan imprimatur on the nation’s governance has begun to emerge. Power, it would seem, will get priority attention.
And yesterday, Finance Minister, Mansur Muhtar, explained that the Federal Government has included the N75 billion meant for the $500 million bond issue because it is still necessary for it to access the 10-year bond from the International Capital Market (ICM) for development purposes.
The Acting President, Goodluck Jonathan, yesterday met for several hours with the steering committee of the Federal Government’s National Integrated Power Projects (NIPPs), with focus on the completion of electricity generating plants, transmission lines, the gas, pipelines and the distribution networks.
The Minister of Power, Lanre Babalola, told journalists after the meeting that additional work was needed in order to arrive at the completion of the projects slated for this year “in good time”, assuring that the “projects are expected to start production in the second and third quarter of this year.”
The bond issuances, which were in the 2009 budget, were suspended due to the financial crisis in the ICM, which was considered to be capable of undermining the success of the bond issuance and the realisation of the objectives for Nigeria’s entry into ICM.
In a February 3, 2010 letter with reference number DMO/MDD/001/T/18, and titled RE: 2010 Appropriation Bill and the proposal to issue a USD 500M (naira-denominated) bond in the International Capital Market, he wrote: “(You) may note that since the objectives for approaching the capital market are still very relevant, it was considered expedient to include it in the 2010 Appropriation Bill submitted by Mr. President to the National Assembly.
According to Muhtar, the purpose of his letter is to crave the indulgence of the Upper House “to vary the currency in which the bond will be issued from Naira to U.S. Dollars.”
He went on: “As noted in Paragraph 1 of this letter, the currency of the proposed bond issue that was approved in 2009 was the Naira and this is what has also been included in the 2010 Appropriation Bill which is currently before the National Assembly. The reasons for proposing a Naira issuance earlier were: to avoid the exchange rate risk associated with a foreign currency borrowing; promote the visibility of the Naira in the global financial community and support the goals of the FSS 2020 regarding future convertibility of the Naira. The Distinguished Senator may note that while, these reasons are still valid, the likelihood that a bond issued outside of the major currencies (USD, GBP and Euro) will be well received by international investors whom the issuance is targeted at is very low. Accordingly, we seek to change the currency of the proposed bond issuance from Naira to U.S. Dollars.”
“A U.S.D-denominated bond would still be beneficial to Nigeria in several ways, including: establishing a benchmark in the ICM against which future borrowings by the Federal Government, sub-nationals and corporate in the ICM would be benchmarked; promoting visibility in the direction of Nigeria’s economic potentials and macro-economic indices; and, supporting the attainment of Vision 2020 and the goals of FSS 2020.”
The only risk involved in the change in the currency of the issue, according to him, was the exchange rate risk, which was not significant when compared to the nation’s total debt portfolio.
He disclosed that as at December 31, 2009, foreign loans stood at N 582.62 billion (USD 3.95 billion) or 15.29 per cent of the nation’s Total Debt Stock of N 3810.65 billion. Furthermore, 86.42 per cent of the total external debt stock was concessional.
He urged the Senate “to change the currency of issue of the proposed bond offer to USD and incorporate accordingly into your consideration of the 2010 Appropriation Bill.”
Babalola told journalists after the meeting at the Presidential Villa that “one of the issues that was deliberated upon at the Steering Council of the NIPP today is how to move ahead with the assets that are being developed for the NIPP. And it was agreed that the Power Holding Company of Nigeria (PHCN) are the owners of the assets. The Council considered a memo from the attorney-general of the federation on the destruction of PHCN and it was agreed that funding of the various projects should be accordingly reflected in the sharing of the holding company.”
He added: “On gas delivery, the Council agreed to have a meeting with the gas companies and all the stakeholders. In many places, we are experiencing delay because the owners are not allowing the contractors to move ahead with the work. The council is to summon governors of such area. The generation today is under 2,400megawatts. The sudden drop in power supply is as a result of the lack of gas. The Ministry of Power is talking with the Ministry of Petroleum Resources and also NNPC through PHCN.
“We have brought the issue of gas to the attention of the Acting President a number of times and unless all the problems militating against the supply of gas to the power stations are addressed, there is no way we can actually deliver more power to Nigerians. As at December 2009, we were generating about 3,400megawatts but as at today, we have lost about 1,200megawatts. The capacity to generate 4,000megawatts has been compromised as a result of the lack of gas to the power plants.”
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