Govt must honour power firms contracts, says Sanusi

The Federal Government must respect and fulfil terms and conditions it signed with local and foreign investors that won power sector bids, Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi said at the weekend.
Sanusi spoke during the 46th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos. According to him, investors will not take the government seriously, if for any reason it reneges on keeping its own side of the contracts.
“Government must respect contracts signed on power. Under no circumstance should these contracts be revoked and I am happy that the power reforms contracts have not been revoked,” he said.
Data provided by the Bureau of Public Enterprises (BPE) showed the assets for privatisation include 11 distribution companies (Discos) and six generation companies (Gencos) from the unbundled Power Holding Company of Nigeria (PHCN).
The Discos winners include Abuja Electricity Distribution Company Plc, Benin Electricity Distribution Company Plc, Enugu Electricity Distribution Company Plc and Eko Electricity Distribution Company Plc, among others.
Those who won Gencos include Ughelli Power Plc, Sapele Power Plc, Shiroro Power Plc, Geregu Power Plc, Afam Power Plc, and Kainji Power Plc.
Bidding for these assets has been completed with preferred bidders named by government, but some entities that lost out have rejected the process, saying it was full of fraud. Many others, including those who won the bids, however, adjudged the process as transparent.
On the economy, Sanusi said it is important for the government to start and continue building the fiscal buffers needed to protect the economy. He also urged government to go into a period of strong serious fiscal restraints and consolidation.
“We must continue to build up the external reserves and protect the economy from external shocks to oil prices and focus on the strength and resilience of the banking system. Banks are not set up to invest in government bills alone, banks are not set up to use depositors’ funds to bet on the capital and real estate markets, banks are set up primarily to mobilise savings and move these savings into the real economy where real production, real jobs and real income are created,” he said.
He explained that as at last Friday, foreign reserves stood at $45.68 billion, with the exchange rate kept stable within the announced band of N155 plus or minus three per cent.
“In a year which removed 50 per cent of fuel subsidies, where you have very high increase in international food prices and energy prices, where you have general instability and where we had forecast that inflation might reach 14.5 per cent in August, inflation is still under 12 per cent,” he said.
According to him, as at September, inflation was 11.3 per cent, but is expected that there might be an inching up in food inflation figures expected to come out on Monday (today). He explained that high reserves of more than a two-year high, stable exchange rates, relatively benign inflation, but obviously, very high interest rates and lending rates in the money market, are the prices Nigerians have to pay for the kind of economic stability being enjoyed.
He said the International Monetary Fund (IMF) had concluded a financial stability assessment programme and was impressed by the work that has been done in the banking sector.
“They were able to pronounce that we have put the banking crisis behind us. The Nigerian banking industry, with average capital adequacy ratio of 17 per cent, is one of the highest in terms of capitalisation in the world. The banks have strong liquidity position. We have worked with governance issues,” he said.
Sanusi said the Asset Management Corporation of Nigeria (AMCON) had not just bought bad loans from banks, but recapitalised some rescued banks. “AMCON had to put in nothing less than N2.3 trillion just to fill the hole that had been left by the management of banks, and when I talk about hole, I am talking about negative capital. If that N2.3 trillion had not been put in, what would have been lost was N13 trillion in deposits and interbank,” he said.
Sanusi said but for the AMCON intervention, many of the banks that were safe and healthy would have been brought down by the banks that had taken money from them, and that would have caused severe crisis in the sector.