The decision to sanction any erring bank participating in the N213 billion power sector financing by the Central Bank of Nigeria (CBN) may have become necessary considering reported acts of sabotage that are frustrating current efforts by government and power distribution companies to revamp the sector.

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The National Electricity Regulatory Commission (NERC) had on November 18, 2014, signed the N213bn Memorandum of Understanding (MoU) with Chief Executives of Deposit Money Banks and the CBN on the Nigeria Electricity Market Stabilisation Facility (NEMSF), popularly called power sector intervention.
The CBN, also, listed a total of 18 infractions and penalties, which it says, are intended to remove bottlenecks responsible for low power generation across the country. Current power generation is still less than 3,000 mw, a far cry from government’s projected 10,000 mw annually.
The sanctions for various offences that may be committed by the participating banks in the CBN-NEMSF programme range from warning to penalty of between N500,000 daily to N10m.  The participating banks could also have their participation deal terminated, if any of them runs foul of the rules. About 14 banks are taking part in the refinancing scheme in which the World Bank has offered to guarantee $1.75bn lifeline. This amount represents a total of $5bn budgeted for Nigeria over a 4-year period.
The infractions include, failure by the banks to provide statement of accounts maintained by the electricity distribution companies (DISCOS), to the refinancier/administrator; or for allowing revenue to be paid into a bank account different from the Feeder Collection Accounts. Other infractions include attempts by the banks to allow withdrawals or debits from Feeder Collection Accounts by a non-Principal Collection Account.
It will be recalled that the CBN had through the participating banks disbursed part of the N213bn intervention fund to several DISCOS and GENCOS and other allied firms in the electricity value chain.
The beneficiary companies included three DISCOS and three GENCOS. The facility is to be repaid within a 10-year period to enable them address the challenges hampering power generation and distribution in the country. It is part of supporting the reforms in the power sector. The six companies are located in Enugu, Ibadan, Kano, Ugheli, Egbin and Geregu.
We welcome the penalties listed by the apex bank if that will bring the much-awaited solution to the perennial challenges in the electricity sector despite the handover of power firms to new owners, and in spite of billions of dollars sunk into the sector by previous civilian administrations. We want to believe that the penalties will put the banks on their toes, and perhaps the beneficiary power firms to realise that to whom much is given, much is expected. Sadly, expected improvement in the electricity market is far from been realised in both generation and distribution chain despite the financial intervention.
We, therefore, advise all the participating banks in the power sector financing and the power firm operators to understand their obligations in the entire process. The present situation in the power sector is frustrating investors in their efforts to upgrade their processes aimed at effective and efficient delivery of electricity in the country. This has had far-reaching negative consequences in the economy as power is the catalyst for economic growth.
It is disheartening that the power sector has become a Gordian knot to crack despite huge investments made in recent years. The present poor state of the sector would have been avoided if the investments had been properly managed.
With our country now in recession, a turnaround in the power sector should rev the economy back to growth. The CBN should ensure that the penalties are enforced against any bank that breaches the objectives of the power sector financing. Rules are there to be obeyed and penalties are only meaningful when they are enforced.