In the just concluded week, the Federal
Government further took another bold step, as regards its promise to deliver electricity to more households in Nigeria, as it signed a contract of the pre-engineering phase of the Presidential Power Initiative project (previously known as Nigerian Electrification Roadmap) with Siemens.
FG commenced this project in July 2019 when it signed a Letter of Agreement with Siemens AG on the Nigerian Electrification Roadmap which is meant to upgrade the country’s electricity network to achieve operational capacity of 25,000 megawatts from the current average of around 4,500 megawatts.
Hence, on July 29, 2020 the Federal Executive Council (FEC) approved the payment of EUR15.21 million (N6.94 billion) offshore and N1.71 billion onshore as part of government counterpart funding for the power deal to show commitment.
Notably, FG created a special purpose vehicle, FGN Power Company, which is expected to oversee to the effective implementation of the project as Siemens Energy Nigeria commences work.
For the pre-engineering phase, work to be done include engineering design works, specification for onshore installation, commissioning works for the transmission and distribution systems, network development studies, power simulation, training, and support services.
Going by FG’s expectation, the Public-Private-Initiative investment in power sector should realign and optimise the available capacities across the entire value chain from generation of electricity to transmission and distribution.
In another development, Nigeria’s Debt Management Office (DMO) stated that Nigeria has over USD5.8 billion yet to be disbursed foreign loans as at December 31, 2020.
Given the latest data on Nigeria’s total debt stock as at September 30, 2020, the country’s total foreign debt was USD31.96 billion; hence, the eventual disbursement of the USD5.8 billion would increase foreign debt profile to USD37.8 billion.
According to the debt office, a larger chunck of the fund would come from International Development Association (IDA), about USD1.25 billion is to come from the Export-Import Bank of China, while EUR500 million is expected from Agence Francaise de Development and USD425 million from European Development Fund.
With the receipt of the fund, projects such as Nigerian 40 Parboiled Rice Processing Plants Project, Nigeria Transmission Expansion Project Phase I (NTEP-1), Nigeria Transmission Expansion Project Phase I (NTEP-1) (AGTF), and the Northern Corridor Power Transmission Project amongst others.
Meanwhile, crude oil prices continue to surge higher, especially the West Texas Intermediate (WTI) crude price which rose by 4.96% w-o-w to USD63.53 a barrel.
Also, Brent crude and Nigeria’s crude grade (Bonny Light) increased by 4.69% and 4.31% to USD66.11 and USD65.53 per barrel respectively as at February 26, 2021. Nevertheless, we saw the U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rise w-o-w by 0.28% to 463.04 million barrels as at February 19, 2021 (also, inventories rose by 4.40% y-o-y from 443.34 million barrels as at February 21, 2020).
Suprisingly, the US crude oil input to refineries dropped by 17.47% w-o-w to 12.23 mb/d as at February 19, 2021 (It also declined y-o-y by 23.60% from 16.00 mb/d as at February 21, 2020)
We feel that FG’s commitment to scaling up the country’s electricity output is noteworthy, particularly with the choice of partnering with one of the best hands in the industry and setting aside part of the undisbursed foreign debts to some other power projects.
Hence, we expect FG to continue to show commitment as regards counterpart funding in order not to stall the implementation of a project that could transform the energy landscape of the country, and positively impact the economy – which just narrowly recovered from recession.