(Ecofin Agency) - The Federal Executive Council of Nigeria (FEC) has approved a power guarantee assurance valued at N701 billion ($2.2billion) to electricity generating companies (GenCos) to help solve liquidity challenges faced by the energy sector. This is to be provided by the Central Bank of Nigeria (CBN).

According to the Minister of Power, Works and Housing, Babatunde Fashola (photo), who disclosed this on Wednesday, the approval by the council was to provide the guarantee for Nigeria Bulk Electricity Trading (NBET) to pay, on a monthly basis, the power purchased from GenCos. In addition, the money will serve as assurance for Gencos which are having difficulties in paying gas suppliers.

“What we seek to achieve here is to bring some stability to the production side of the power value chain and also give confidence to investors who want to come in, who are concerned about how to recover their money,” he explained.

Fashola added that the guarantee will be extended till December 2018.

NBET is a state-owned company which purchases power from GenCos to add to the national grid. However, the company recently had been faced with a series of liquidity problems which had affected its ability to deliver its public-private partnership obligations.

Anita Fatunji