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Power Sector Reform Initiatives by Central Bank of Nigeria CBN the Bankers Committee

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Power Sector Reform Initiatives by Central Bank of Nigeria CBN the Bankers Committee

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    1. Power Sector Reform Initiatives by Central Bank of Nigeria (CBN) & the Bankers’ Committee

    2. 2 The Case for Power Sector Investment

    3. A Letter of Credit (LC) backed by the Federal Government to provide liquidity to the Bulk Trader A guarantee issued by a multilateral or commercial institution with a counter guarantee from the Federal Government A vanilla Sovereign Guarantee issued by the Federal Government A World Bank Partial Risk Guarantee (supported by an Indemnity Agreement from the Federal Government) A FGN Treasury Bond to provide liquidity to the Bulk Trader A combination of these options Option that is being pursued at the moment is the route with World Bank is the Partial Risk Guarantees as they are deemed to be the most efficient use of the Federal Government’s balance sheet Nigerian Electricity Liability Management Company (NELMCO) would assume non-operating assets and liabilities of the Power Holding Company of Nigeria (PHCN) 3 FGN’s Credit Enhancement Package

    4. Power Reform - Initiatives by Central Bank of Nigeria 4 Central Bank of Nigeria have provided a great deal of impetus and support for the power reform process and as a catalyst for “crowding-in” private sector investment Advocacy in conjunction with the banking industry resulting in regulatory reforms Working with PENCOM to unlock pension assets for investment in infrastructure Pension Commission (PENCOM) Regulation 5.2.3 allows Pension Fund Administrators (PFAs) to invest in Infrastructure projects through eligible bonds or debt securities CBN would provide guarantee to (PFAs) for investment in Infrastructure projects until projects acquire a rating Working with Bankers Committee to build Industry through a capacity building programme Aim to train 250 banking professionals in Project Finance (Power) in 2011 Establishment of the Power and Airline Intervention Fund (PAIF) N300 billion from the CBN investment in a debenture to be issued by the Bank of Industry for on-lending to Banks

    5. N 300bn Power & Airline Intervention Fund (PAIF) 5

    6. Structure of the PAIF 6

    7. Eligibility Criteria for Power Projects 7

    8. 8 The Bankers’ Committee held its inaugural Annual Retreat held in in December 2009 Retreat was borne out of a need for the financial sector to collaborate and articulate ways to drive sustainable economic growth The Bankers’ Committee identified three critical sectors - Power, Transportation and Agriculture – for urgent Financial System led transformation There has been significant progress and success on the action plans defined at the annual Bankers Committee retreat including: Increased lending to the power and manufacturing sectors and SMEs; Collaboration with state governments and federal MDAs to identify investment opportunities of national importance; Introduction of CBN intervention funds targeted at the real sector; Economic advocacy resulting in regulatory reforms Power Reform - Initiatives by the Bankers’ Committee

    9. 9 Some of the deliberate steps taken by the Bankers’ Committee on Power include Presenting a clear strategy to government on regulatory bottlenecks to make Power Sector attractive to investors and financiers Identifying syndicate project finance opportunities to fund across the power sector value chain Exploring the flotation of development bonds as a means of low cost and long term funding Facilitate the intervention of international financing agencies to augment local funding options Developing capacity building programme for industry stakeholders to position for implementation of the power roadmap Power Reform - Initiatives by the Bankers’ Committee

    10. Near-term outlook for the economy is very robust with economy projected to grow by 7.98% in 2011 with Non-oil output growth in 2011 estimated to be 8.84% Cautious optimism on inflation with some moderation expected in the remainder of 2011. CBN still committed to the pursuit of single digit inflation Relative stability in the FX market is likely to be sustained in the near-term and the CBN will continue to monitor developments in the market to check volatility and speculation With Asset Management Company (AMCON) now in place, there is better visibility on the resolution of the banking crisis Government has made some commendable efforts to address some of the binding constraints to growth particularly physical infrastructure (power sector reforms), investment climate (deregulation) and access to finance (PPP framework) 10

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