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Banks agree to pay N25bn PHCN debt

By on August 16, 2014

Nigerian banks have agreed to assist in the payment of N25bn legacy debts owed gas companies by the defunct Power Holding Company of Nigeria.

The banks made this known on Thursday during a meeting of the Bankers’ Committee in Lagos.

Industry analysts said the announcement was part of the moves by the banks to recover loans advanced to the power firms carved out of the PHCN during the power sector privatisation exercise.

The committee said it had realised that lack of adequate gas supply was inhibiting the growth of the power sector.

It, therefore, said the decision to help with the payment of the N25bn debt owed the gas companies was because of its commitment to support the gas to power project in order to improve production in the sector.

Aside paying the debt, the Bankers’ Committee said another incentive for the gas companies was that the price of the commodity had been reviewed upward.

Speaking shortly after the meeting held at the Central Bank of Nigeria’s office in Lagos, the Group Managing Director, Ecobank Nigeria, Mr. Jubril Aku, said, “The Minister of Petroleum Resources met with stakeholders and announced an increase in the price of gas because the government wanted a situation whereby gas would be commercially available.”

Aku was one of the bank chief executive officers that spoke with journalists on behalf of the committee.

The others were the Director of Banking Supervision, CBN, Mrs. Tokunbo Martins; Group Managing Director, Skye Bank Plc, Mr. Timothy Ogunatayo; and Group Managing Director, Access Bank Plc, Mr. Herbert Wigwe.

Aku added, “The increase in gas price was from $1.50 to $2.50, with a transportation percentage of 0.8, and enough incentive of 3.3 per cent. In taking this decision, it was considered that it was important for gas companies to grow in their production, as only 23 gas companies among the whole lot are currently independent.

“More so, the gas companies have always been agitating that these debts should be paid. By the time these debts are paid, most of the problems of gas to power would have been resolved and that will enable the country’s power sector to develop faster.”

Martins gave an assurance that the macro-economic condition of the nation’s economy was very sound.

“The nation’s external reserves stand at $40.32bn and inflation at 8.1 per cent,” she said.

Martins noted that even through the inflation rate went up slightly; monetary conditions were not tightened in line with the CBN vision to bring down the interest rate.

She also said the long-awaited fund for Micro and Small Medium Enterprises would be launched on August 19, adding, “N220bn has been approved for MSME funding and it will be launched by President Goodluck Jonathan.”

The CBN director said, “Sixty per cent of that fund is dedicated to women and female entrepreneurs. Part of the fund will be disbursed on August 19.”

Wigwe said the committee was not happy with the progress made so far with the bank customer biometric registration project.

According to him, the project is meant to minimise fraud, enhance anti-money laundering efforts and enhance loan disbursement.

He added that it was resolved that the banks were supposed to deepen the overall level of enrolment as soon as possible.

The committee also expressed its support for the Victims Support Fund, which it considered as critical to the system.

It dispelled insinuations that the VSF was meant for only victims of the Boko Haram insurgency.

“It is for vulnerable groups within the country. It is not for only Boko Haram. If we don’t resolve issues like this or contribute to the system, it will turn around to hurt you. It is good for the common good. If we don’t do it, the issue of profitability will be affected,” Wigwe said.

He added that the fund won’t be contributed by only the CBN and the Nigeria Deposit Insurance Company, but would be shared among the banks.

Oguntayo, on his part, said the banks were ready to support food production.

“We agreed on this having realised that our mass importation of rice is further contributing to the economic growth of other nations, while deepening our unemployment market,” he explained.

Oguntayo said the committee would support local production of rice, as there were only eight plants at the moment.

“We shall support the plants to embark on backward integration; and with it, we will be creating more employment,” he added.

 

[Punch]