Azura Power Plant: Nigeria’s $1.2bn Foreign Reserves Not At Risk – Presidency

The Nigerian Presidency has debunked speculations that Nigeria had mortgaged a whopping $1.2 billion of her foreign reserves to investors in the Azura Power Plant located near Benin-City, Edo State.

Speaking with New Telegraph over the weekend, a top Presidency official, who pleaded anonymity, noted that no investor can just pull out any amount from Nigeria’s foreign reserves.

“No investor can just pull out $1.2 billion or any amount from Nigeria’s foreign reserve like that. Yes, there was a Put/Call Agreement signed with Azura on October 22, 2014, whereby Nigeria reserved the option to buy over the assets or the company to give up the assets and seek payment, if Azura defaults,” he said.

“However, the amount to be paid can only be determined when the option is exercised and nobody can simply pull out money from our foreign reserves just like that,” he said.

According to the official, the agreement reached between the Federal Government and the Azura Power Plant showed that the Power Purchase Agreement (PPA) became operational in April 2013 with the execution of the Power Purchase Agreement followed by several other aspects of the deal coming to force soon after.

The source noted that contrary to speculation in one of the national dailies, the Vice President, Prof. Yemi Osinbajo and the immediate past Minister of Power, Mr. Babatunde Fashola, did not feature in the agreement, neither did they sign any contract as they were not in office when the agreement was consummated in 2013.

Azura Power Plant

He wondered what any person or group stood to gain by dragging the names of Osinbajo and Fashola into an agreement that they neither originated nor endorsed.

“Neither Vice President Osinbajo nor Mr. Fashola signed any such agreement. They were not even in office when the Azura agreements were signed. Records show that the Power Purchase Agreement (PPA) for the transaction in question was signed on April 22, 2013, during the tenure of the then President Goodluck Jonathan,” he said.

“It must also be said that the Take or Pay Clause in the Power Purchase Agreement, which obliges the Federal Government to pay for power declared available by the company, whether or not it is taken by the government-owned Transmission Company of Nigeria (TCN) is fairly standard, especially where, as in this case, the plant is a huge one requiring enormous set up cost and the country is in dire need of the power anyway.

“The agreement in question, which was already executed as far back as April 2013, is quite typical in power purchase transactions. Nobody would build a power plant, which is a very costly and capital intensive venture, and no lender would put money in one, unless someone had committed to pay for the power.

“At any rate, much of the payment goes straight to Nigeria Gas Company, Nigerian National Petroleum Company and other gas suppliers who make the power generation possible.”

The official further stated that it is the Nigerian Bulk Electricity Trading Company (NBET), which he described as 100% government-owned, that buys power from generating companies like Azura and sells to distribution companies.

According to him, in 2013 when the deal was struck, it “clearly appeared” to be a good deal for Nigeria, which was desperate for power and feverishly seeking the establishment of power plant.

“I will imagine that no one quite envisaged the current situation where electricity generating companies are kept idle because when power is produced, the Transmission Company may not be able to wheel the electricity fully for distribution to customers. It is no longer news that even when the electric power is made available for distribution, the Distribution Companies (DisCos) at times reject it because they have failed to improve their networks and to meter their customers,” he said.

“The fear of the DisCos is that they might be unable to deliver the power to customers or to collect tariff. On their part, customers are reticent to pay because service is appalling and most of them feel cheated by estimated billing.”

He assured that payments made to Azura were by no means wasted since over 80% of electricity generated by the power plant is currently being transmitted and distributed, while the rest is being used by the Transmission Company of Nigeria (TCN) to stabilise the national grid.

Recently, Chairman, Senate Committee on Power, Gabriel Suswam, while presenting a report on ‘Addressing Nigeria’s Power Sector Problems’ to the Senate for consideration at plenary, described the power project agreement as a drain on the country’s treasury and called for its immediate termination.

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