Mr. Lai Omotola, Group Managing Director of CFL Group of Companies, yesterday asked the Minister of Power, Works and Housing, Mr. Babatunde Fashola “to sign an indemnity to or guarantee Nigerians that he would resign his appointment if electricity remains erratic for another two years.”
Omotola, also Publisher of InfraWatch Nigeria Limited, rejected the recent 45 per cent increase in electricity tariff, noting that from all indications, electricity tariff hike “is not a solution to the country’s epileptic power supply.”
He therefore challenged the minister to resign from his current appointment if the country’s electricity remained epileptic for two years during an interactive section with some journalists in Lagos yesterday.
At the session yesterday, the chief executive lamented that the federal government used the public funds to provide subventions for the private companies that bought power assets under the administration of former President Goodluck Jonathan.
“That subvention from the Central Bank of Nigeria (CBN) has come. It is just a drop in the ocean. The CBN provided subvention for the companies to pay for gas. It has not worked. Another subvention one is coming.
“If the minister is sure of himself, let him sign an indemnity to or guarantee Nigeria that if the power is not stable in two years, he would resign his appointment. We have started counting again. Our stake in this matter is that of transparency and logic.”
Omotola said nothing will change tremendously in two years, even with electricity tariff hike, citing the technical capacity of the indigenous companies that bought the power assets and their financial capacities to bring together necessary infrastructure that could guarantee steady power supply.
He lamented that the federal government only looked at the kind of partnership the technical partner “has with the indigenous investor without much emphasis on financial wherewithal. It is not enough for indigenous companies to just bring technical partners.
“It will have been better for indigenous companies to bring the technical partners that will also bring equity into that partnership. But that is lacking today. If the man brings equity, the difference is that he is not now a contractor to the indigenous companies.
“He is also an investor in the company. Now, the indigenous companies will now be able to leverage on two things: its technical competence and financial coverage. That was missing in this bid and we are where we are today. As far as this sector is today, we do not have a dominant foreign equity player,” he explained.
Omotola said the federal government “understands that there is a financial problem. The federal government also understands that the problem was actually created by the inability of these indigenous investors to generate adequate funding that the electricity industry really requires. The federal government and investors under-estimated the sector.
“To come clean that there is a financial problem, the federal government decided to use another strategy. What is this strategy? The strategy is help the indigenous companies through the increase of electricity tariff. What is the tariff going to do? It will only achieve one objective.
“It will only help the indigenous companies service the loans at the expense of the consumers. When the loans are serviced, there could be a little of an opportunity for the banks to now raise adequate capital for expansion.”
He disclosed that of $2.6 billion raked in from the sale of power assets, the Nigerian banks “provided about 80 percent of the fund. It should not be that way because foreign investors are primarily supposed to bring majority of their own equities in terms of the capital mix, where you find investors bring at least 60 percent equity.”
He said the Nigerian banks “can only finance projects for two or three years. Between two and three years, our banks want to see their funds coming back. So, our banks are not suited to fund the electricity industry. The minister said no bank would want to fund the industry because the price is not bankable.
“Can Fashola tell us, which of the bank he is referring to? If Fashola is referring to Nigerian banks, the business model of the indigenous companies will not work? The interest rate and fund tenure will not make it work. What we are suggesting is that the federal government should set up a finance development bank that is strictly towards development projects such as this should be quickly put together.
“If our local banks will play any role, it will be in the area of providing working capital. We are just supporting these projects by working capital. This is a complete shift from what we have today because for those companies to survive, they need very low interest rate with very long-term loan,” Omotola said. Thisday
