Nigerian banks increasingly involved in power sector - CNBC Africa

Nigerian banks increasingly involved in power sector

Western Africa

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An oil and petrochemical refinery in Kaduna, Nigeria.

Nigerian banks have become substantial interested parties in what’s going on in the country’s power sector.

“Two point one billion US dollars for acquisition finance, which is a proportion of the acquisition finance, is a lot of money. Independent power plants, that were built by government, are going to come up for privatisation in 2014.Tenders have just opened and I would expect, depending on how certain outstanding matters are dealt with, that Nigerian banks will again take an interest in that,” Fidelity Bank’s CEO Reginald Ihejiahi told CNBC Africa. 

“Obviously we keep on looking at risk, we keep on looking at our portfolio, and all of this is done in the context of what is prudent for Nigerian banks.”

Nigerian banks have invested over 2 billion dollars in reforms in Nigeria's power sector, which includes financing bids for recently privatised assets as well.

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“The Nigerian banking sector has supported the power sector in, I would say, two broad ways. The first was to finance independent power plants. Most people don’t know this but we’ve always had independent power plants, gas-fired largely. Some of them are plants that are contracted to supply power to specific off-takers, like manufacturing companies, especially the cement companies,” said Ihejiahi.

“The second way, which is what most people look at now, is the just-concluded privatisation of the assets of the previous monopoly – PHCN. Nigerian banks finance the acquisition by the eligible consortium of generating plants and distribution plants. Total investment provided by Nigerian banks is 2.1 billion US dollars, so that’s quite significant.”

He indicated that they have taken on an advisory role for the consortia that acquired the Power Holding Company of Nigeria’s (PHCN) assets.

“A lot of advisory work has gone in there to make sure that these actually become successful cash flow generating enterprises post the handover.”

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