Gencos facing difficulties in servicing N402bn loans owed to Nigerian banks

The improvement in electricity supply in recent times may be short-lived as a result of the huge debt burden weighing down the generation companies to various Nigerian banks in the country,The Guardian reports.

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It was learnt that First Bank of Nigeria Holdings Plc; Zenith Bank Plc; United Bank for Africa Plc (UBA); Guaranty Trust Bank Plc (GTBank); Access Bank Plc; Diamond Bank Plc; Fidelity Bank Plc; and Skye Bank Plc collectively gave out loans worth N402 billion to electricity plants. According to the first quarter Statistical Bulletin of the Central Bank of Nigeria (CBN), credit to the electricity and energy sector have been rising exponentially, of which independent power plants and power generation companies (Gencos) owed N340 billion in December 2015, N357 billion in February 2016, and N357 billion in March 2016.

It was learnt that the electricity firms were already facing difficulties in servicing the over N402 billion loans, which they collectively took to purchase the plants when they were privatised in 2013. This is because when the power generating companies took loans from local and international banks to acquire the electricity plants, the foreign exchange (forex) rate was about N157 to $1. They are now finding it difficult to pay back as the rate has risen to over N320 to $1.