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Nigeria approves N8.64bn for Siemens electricity deal

Nigeria’s Federal Executive Council (FEC) meeting has ratified President Mohammadu Buhari’s anticipatory approval for the release of a total of N8,648,081,465.2 (€15.21 million or N6,940,081,465.20 and offshore and N1.708 billion onshore) towards the counterpart funding for the power deal with Siemens AG, signed by the Nigerian and German governments in 2019.

Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, while briefing newsmen after the Council met, explained that the memo seeking the ratification was jointly presented with her Power ministry counterpart, Saleh Mamma, for the counterpart funding of the bilateral from German Consortium guaranteed by the German government through Euler Hermes.

She said the ratification is to finance the implementation of the end-to-end grid modernisation and expansion programme of the project.

Muhammadu Buhari, Nigeria's President

Nigeria had in December 2019, allocated N61 billion for the Nigeria Electrification Road map which will be developed in partnership with Siemens AG.

In July 2019, the government and Siemens signed a Letter of Agreement on the Nigeria Electrification Road map after President Buhari and the German Chancellor, Angela Merkel met on August 31, 2018, in Abuja.

Nigeria is expected to spend about €3.11 billion or N1.15 trillion across four major states. The Nigerian electrification project has three phases, and it aims at achieving 25,000 megawatts of electricity in the country by 2025.

Power projects in the budget include the 3,050-megawatts Mambilla hydropower plant in Taraba State, for which N2 billion counterpart-fund was set aside. Others are 2x60MVA 132/33kV substation at Gwaram in Jigawa State (N717 million); 215MW power station in Kaduna (N190m); and Kashambilla transmission in Taraba (N506 million).

Ahmed said the amount is for the first phase of the three phases project designed to include 23 transmission initiatives as well as 175 separate transformative projects.

She said: “Today at the council, we discussed stage one of phase one of this project under presidential power initiative. This project is designed to include 23 transmission initiatives as well as 175 separate transformative projects in the electricity distribution franchises that we have in the country.
“The project will also support the regulator, Nigerian Electricity Regulatory Commission (NERC), to transition towards a programme of improving metering in the electricity industry in the country.
“Let me remind us as citizens that Mr President and his German counterpart met in Abuja in 31st August 2018 and committed to jointly increase the capacity of the Nigerian electricity grid from the current capacity of 5,000 megawatts to 25,000 megawatts over a three-phased Programme.

After this meeting, an MOU was executed on the 23rd of July, 2019 between the Nigerian Government and the Siemens AG with the German Government support.

“The MOU is designed to deliver this end to end modernization programme which we are calling the presidential power initiative. The objective of this presidential power initiative is to address the intractable problems that have bedevilled the Nigerian power industry, over a period of years.
“The project will be implemented in three phases and the subject of our memo today is phase one.
“The facility for this programme is to be sourced from the German consortium and it would be guaranteed by the German government through Euler Hermes covering 85 per cent of the project cost, the highly concessional facility with two to three years moratorium, 12 years loan repayment period with an interest rate of labour plus one per cent to labour plus 1.2 per cent. And also the Federal Government is to provide 15 per cent counterpart funding as its contribution towards the project.
“We have a provision in the 2020 appropriation revised for the government’s counterpart funding.
“The federal government is taking the loan from the German government with the plan to on-lend this particular loan to the distributing network. So, it’s a convertible loan facility to the DISCOs and we will be working with the DISCOs to restructure an appropriate loan agreement as soon as we are able to close out on this initial phase of the process. And the Council approved and ratified Mr President’s approval.”