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FG must encourage power reforms by honouring contracts – Sanusi

By on November 19, 2012

CBN Governor, Mallam Sanusi Lamido

Over the weekend the Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi said the Federal Government have to respect and fulfill terms and conditions it agreed with the investors that won power sector bids, both the local and foreign investors.

Speaking during the during the 46th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, Sanusi stated that the government will be taken seriously only if it keeps its side of the agreement.

“Government must respect contracts signed on power. Under no circumstance should these contracts be revoked and I am happy that the power reforms contracts have not been revoked,” he said.

According to data provided by the Bureau of Public Enterprises (BPE), assets from the unbundled Power Holding Company of Nigeria (PHCN) for privatisation are 11 distribution companies (Discos) and six generation companies (Gencos).

The Abuja Electricity Distribution Company Plc, Benin Electricity Distribution Company Plc, Enugu Electricity Distribution Company Plc, and Eko Electricity Distribution Company Plc, among others are the Discos winners.

The Gencos winners include, Ughelli Power Plc, Sapele Power Plc, Shiroro Power Plc, Geregu Power Plc, Afam Power Plc, and Kainji Power Plc.

Although the bidding process has been completed and preferred winners named by government, some have continued to fault the process, saying it was not fair. On the other hand, some have lauded the process, saying it was flawless, including the winners.

The CBN further urged the government to go into a period of strong serious fiscal restraints and consolidation.

“We must continue to build up the external reserves and protect the economy from external shocks to oil prices and focus on the strength and resilience of the banking system. Banks are not set up to invest in government bills alone, banks are not set up to use depositors’ funds to bet on the capital and real estate markets, banks are set up primarily to mobilise savings and move these savings into the real economy where real production, real jobs and real income are created,” he said.

Last Friday, foreign reserves were $45.68 billion, with a stable exchange within the band of N155 plus or minus three per cent.

“In a year which removed 50 per cent of fuel subsidies, where you have very high increase in international food prices and energy prices, where you have general instability, and where we had forecast that inflation might reach 14.5 per cent in August, inflation is still under 12 per cent,” he said.

Sanusi further said the 11.3 inflation rate experienced in September might inch up a little because of the flood, which the figures are
expected today. He explained that the kind of economic stability being enjoyed today by Nigerians, which include high reserves of more than a two-year high, stable exchange rates, relatively benign inflation come with a price of high interest rates and lending rates in the money market.

“They were able to pronounce that we have put the banking crisis behind us. The Nigerian banking industry, with average capital
adequacy ratio of 17 per cent, is one of the highest in terms of capitalisation in the world. The banks have strong liquidity position.
We have worked with governance issues,” he said.

The CBN boss revealed that the Asset Management Corporation of Nigeria (AMCON) bought bad loans from banks as well as recapitalised some rescued banks. “AMCON had to put in nothing less than N2.3 trillion just to fill the hole that had been left by the management of banks, and when I talk about hole, I am talking about negative capital. If that N2.3 trillion had not been put in, what would have been lost was N13 trillion in deposits and interbank,” he said.

Sanusi added that if not for AMCON intervention, many banks that are operating well today would have been down causing crisis in the sector.