Expert Laments Inadequate Foreign Technical Partner Equity in Power Sector

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The Group Managing Director of CFL Group of Companies, Mr. Lai Omotola, has canvassed for the establishment of a finance development bank specifically for the development of the power sector and also to limit the role that indigenous banks play in the sector to providing working capital for the power firms,  The Nation reports.

He said the recently approved 45% increase in electricity tariffs by the Federal Government was not the  answer to the crisis in the power sector. Omotola attributed the clamor for the increase, to the failure of the indigenous companies that bought the nation’s power assets to source for adequate technical partners that could bring in some equities. He said: “It would have been the other way round and the sector would have been virile, had the investors been mandated to bring in foreign investors who would bring in their equities in terms of the capital mix, about 60 percent equity.”

He explained that about 80% of the $2.6 billion that was used to purchase the power assets in 2013 were on short tenure loans and were sourced from Nigerian banks. This has now become debt, which is creating a bit of pressure on the financial system. He noted that the two factors which made loans from Nigerian banks particularly problematic for the power sector were high interest rates and the short term tenure of the loans.

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