Nigerian Bulk Electricity Trading Plc, which acts as a clearing house for power generating and distribution companies, will get an additional $85.2 million from the government to shore up its capitalization, Chief Executive Officer Rumundaka Wonodi said.
“Right now there is still that steady gradual capitalization through the budget,” Wonodi said in an interview in the capital, Abuja, yesterday. “But if there is a need for major intervention, the government is willing to do that.”
The state-owned agency, also known as the bulk trader, was created in 2010 and capitalized with $750 million last year. It is the custodian of agreements authorizing transactions among power companies, enabling it to receive payments on behalf of electricity generators from distributors. The agency could face financial obligations of as much as $2 billion as power generation improves and new plants are built, according to a report by Ecobank Research.
Blackouts are a daily occurrence in Africa’s most populous country of about 170 million people, where demand for electricity is more than double the industry’s 4,000-megawatt capacity.
All power trading between distributors and generators will be guaranteed by the bulk trader after the start of a new privately-led transitional market phase, a 5-to-10 year period that will allow the market to stabilize. In September, Nigeria finalized the sale of 15 state-owned power utilities, ending more than five decades of government control of the electricity market.
While persistent gas shortages at power stations cut Nigeria’s electricity output in half and delayed the start of the transitional phase due this month, the bulk trader is willing to activate some contracts, mainly those held with power distributors, to “test the market,” Wonodi said.
“Distribution companies need to post a bank guarantee or a letter of credit for consumption of power,” he said. “If two or three distribution companies are ready to do that, we could activate their vesting contracts and provide them priority.”