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Tuesday, October 20, 2020 / 12:57 PM / By CBN
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1.0 Introduction
The introduction of the service-based tariff (SBT) in
the Nigeria Electricity Supply Industry (NESI) effective from 1st September
2020 has put increased emphasis on the need to close the metering gap in the
NESI. The closing of this gap will enhance efficiency of revenue collection by
Distribution Companies (DisCos) and thereby facilitate meeting their
obligations to other upstream market participants.
According to analysis provided by Nigeria Electricity
Regulatory Commission (NERC), the current metering gap in the NESI - based on
recent customer enumeration data - is over 10 million, this comprises of
unmetered customers as well as customers with obsolete meters that need to be
replaced. To deal with this, His Excellency, President Muhammadu Buhari approved
the National Mass Metering Program (NMMP) implementation.
This Framework outlines the operational modalities of
the CBN financing support to the DisCos (Downstream) and Local Meter
Manufacturers (Upstream).
2.0 Objectives
The key objectives of the NMMP are:
i) Increase Nigeria's
metering rate
ii) Elimination of arbitrary
estimated billing;
iii) Strengthen the local meter
value chain by increasing local meter manufacturing, assembly and deployment
capacity
iv) Support Nigeria's economic
recovery by creating jobs in the local meter value chain
v) Reduction of collection
losses and increasing financial flows to achieve 100% market remittance
obligations of the DisCos; and
vi) Improve network monitoring
capability and availability of data for market administration and investment
decision making.
3.0 This framework is
sub-divide into three sections namely:
i) Section A: Electricity
Distribution Companies
ii) Section B: Local Meter
Manufacturers
iii) Section C: Additional
Requirements
Section A: Electricity
Distribution Companies
4.0 Definition
A NERC licensed Electricity Distribution Company (DisCo) or body corporate engaged in:
i) Bulk purchase of energy
and onward retail to electricity customers
ii) Collection of tariff and
charges and remittance of payment to the market
iii) Collection of retail
energy related data for the industry
iv) Ownership and management
of electricity distribution infrastructure including meters and metering
infrastructure
4.1
Eligible Activities
The NMMP CBN facility is restricted to the procurement and deployment of meters and the associated infrastructure (software and hardware) to support the metering network. These include, but not limited to:
i) Procurement of NERC
approved meters
ii) Payments for installation
and deployment of meters
iii) Procurement of other
metering infrastructure related production and service provision as may be
prescribed by NERC in relevant orders or by prevailing rules and regulations
iv) Procurement of backend
metering platform and data management systems
v) Procurement of customer
enumeration services
4.2
Prohibited Activities
i)
Procurement of fully assembled meters from overseas is prohibited except meters
imported by Meter Asset Providers (MAP) already in the country as at September
30, 2020 and verified by NERC; and.
ii)
Importation of related metering infrastructure that are currently being
produced in the country is also prohibited.
4.3 Participating Financial Institutions (PFI)
Financial institutions licensed by the CBN to provide
banking services in Nigeria.
5.0 Modalities/ Types of
Facilities
5.1 Tenor
The facility granted shall have a maximum tenor of 10
years but not exceeding 2030
5.2 Moratorium
There shall be a moratorium on the principal amount
for a period not exceeding 24 months from date of loan disbursement.
5.3 Interest Rate
The facility shall be administered at an "all-in" interest rate of NOT more than 9 per cent per annum or any other rate as may be
specified by CBN.
As part of the Bank's Covid-19 relief package, the
interest rate to be charged up to 28th February 2021 shall not exceed 5 per
cent per annum.
Interest shall be payable by the loan beneficiaries in
accordance with the approved repayment schedule outlined in the Transaction
Documents.
The "all-in" interest rate of 9% to be shared as
follows: a) Participating Financial Institution - 6% b) Sponsor (CBN) - 3% PFIs
are to remit the interest due to the CBN on quarterly basis not later than 10 days
after the end of the quarter.
5.4 Collateral Requirement
NERC's approval of a DisCos loan request as a
regulated debt obligation to be charged against all energy collections for the
Nigeria Electricity Supply Industry (NESI) as the next line charge in the
payment waterfalls of each DisCo below the existing payment to the Nigeria
Electricity Market Stabilization Facility (NEMSF), will serve as a collateral
for the lending.
6.0 The financing of the
bulk procurement of Meters by the Electricity Distribution Companies is covered
under phase 0 and phase 1.
6.1
Phase 0 - Financing of orders covered under the Meter Asset Provider (MAP)
programme.
6.2 Amount
to be Accessed To be determined based on the volume and type of meters to be
procured by the DisCo for the contracted MAP.
6.3 Documents Required
I. NERC allocation of verified stock
assigned to the DisCo under Phase 0.
II. Invoice (including account details of
the vendor) for the Meters to be purchased
III. Evidence of MAP procurement from
local manufacturer (where applicable)
IV. Agreement(s) signed with MAPs v)
Certification of the meters by Nigeria Electricity Management Services Agency (NEMSA);
V. Latest 2 - year audited financial
statements; vii) Tax clearance certificate.
6.4 Application Procedure
I. DisCo
apply to its Guarantee Bank (GB) for financing under the programme through
RSSF/DCRR.
II. The GB
conducts due diligence and obtain internal approval for the facility.
III. The GB
applies to CBN for release of funds attaching the documents specified in
section 5.2 above.
IV. CBN
reviews and communicate approval to the GB.
V. CBN
release the funds to the GB after satisfactory confirmation of the fulfilment
of the contract by the Disco.
VI. DisCos
will work within the allocation approved by NERC and the AMSL provided by NERC
to determine how they plan to meet their allotted volumes. If an MAP is
required by a DisCo to supply a volume greater than its declared inventory in
the AMSL, the DisCo/MAP must provide evidence that the excess capacity has been
procured from a local manufacturer; evidence will be in the form of purchase
orders, payment evidence, and evidence of delivery of meters from the
manufacturer to the MAP.
VII. For
the purpose of payment to the MAP by each DisCo's Bank Guarantee (BG) bank,
DisCos will submit NERC approved Meter Service Agreement(s) signed with MAPs,
payment invoice for the Meters to be purchased and a performance bond from the
MAP linked to installation of volumes to be purchased.
VIII. The
MAP's performance bond will be issued jointly to the DisCo and the PFI
IX. BG
Bank to make payment to MAPs only based on terms contained in the submissions
made by the DisCos.
6.5
Phase 1 (CBN funded bulk
procurement from local meter manufacturers/assemblers)
6.6
Amount to be Accessed To
be determined based on the volume and type of meters to be procured by each
DisCo as well as the prices at which meters are bought during the bulk
procurement.
6.7 Documents Required:
i) Copy of NERC allocation of
the quantity of meters to be procured by the DisCo in phase 1;
ii) Meter Agreement with local
meter manufacturer after bulk procurement process;
iii)
Invoice (including the
bank details of the vendor);
iv)
Latest 2-year audited
financial statements;
v)
Tax clearance certificate.
6.8 Application Procedure
i) DisCo apply to its
Guarantee Bank (GB) for financing under the programme (attaching the signed
meter purchase agreement with local meter manufacturer) through Real Sector
Support Facility/Differentiated Cash Reserve Requirement (RSSF/DCRR);;
ii) The PFI conducts due
diligence and obtain internal approval for the facility;
iii) The PFI applies to CBN for
release of funds attaching the documents specified in section 6.2 above.
iv) CBN reviews and release
the funds to the GB to be paid to the local meter supplier's account within 3
working days from the date of release.
v) Respective DisCos will
sign Meter Purchase Agreement (MPA) with successful bidders from the
procurement exercise; this will be submitted to CBN and each DisCo's BG bank.
vi) CBN through the BG bank
will make payments to the preferred bidders on behalf of the DisCos based on
the terms contained in DisCo submissions
Section B: Local Meter
Manufacturers
7.0 Definition
A local meter manufacturer is hereby defined as any
company or body corporate engaged in: i) Manufacturing of electricity meters
and its components ii) Assembly of Completely and/or Semi Knock Down components
into meters
7.2 Eligible Activities
i) Procurement of manufacturing or assembly equipment
for Meters
ii) Set up or expansion of manufacturing or assembly
facilities
iii) Procurement of production data management and
software systems
iv) Working capital
7.3 Prohibited Activities
The facility shall NOT be used to finance the
importation of fully assembled meters
7.4 Eligibility Criteria
The eligible obligors should demonstrate verifiable
evidences of:
i) Technical capacity:
(a) Brownfield - Eligible manufacturers must
demonstrate a track record of experience in manufacturing of key meter
components up to the quality standards instituted by the Nigerian Electricity
Regulatory Commission (NERC) and/or Nigerian Electricity Management Services
Agency (NEMSA) and/or Standards Organizations of Nigeria (SON).
(b) Greenfield - Bankable business plans acceptable to
the PFIs.
ii) Financial capacity: Eligible entities must
demonstrate financial capacity to repay the loan through a sufficient debt
service current ratio (DSCR).
iii) Local content: Eligible component manufacturers
are Nigerian-owned entities or consortiums involving a minimum of 70% local
ownership. iv) Job creation focus: In line with the program's job creation
objectives, eligible manufacturers must demonstrate commitment to employing
local talent with a detailed vocational and technical training plan.
7.5 Participating Financial Institutions (PFIs)
Financial institutions licensed by the CBN to provide banking services in
Nigeria.
8.0 Modalities/Types of
Facilities
8.1 Term Loan
8.2 Amount to be Accessed
Funding shall not exceed 70 percent of the total cost
of the applicable costs/expenses related to meter manufacturing/assembly.
8.3 Tenor
The facilities granted shall have a maximum tenor of
up to 10 years as determined by the project's cash flow profile but not
exceeding 31st December 2030.
8.4 Moratorium
The moratorium on principal shall depend on the type
and nature of the project but shall not exceed 2 years or the construction/
completion period.
8.5 Working Capital
Working capital facility shall be for one year with
provision for roll-over not more than twice (i. e. maximum tenor of 3 years).
8.6 Interest Rate
The facility shall be administered at an "all-in" interest rate of NOT more than 9 per cent per annum or any other rate as may be
specified by CBN.. As part of the Bank's Covid-19 relief package, the interest
rate to be charged up to 28th February 2021 shall not exceed 5 per cent per
annum. Interest shall be payable by the loan beneficiaries in accordance with
the approved repayment schedule outlined in the Transaction Documents. 8 The "all-in" interest rate of 9% to be shared as follows: a) Participating
Financial Institution - 6% b) Sponsor (CBN) - 3% PFIs are to remit the interest
due to the CBN on quarterly basis not later than 10 days after the end of the
quarter.
9.0 Application
Procedure
i) An eligible company that meets the requirements
should submit its request to the Participating Financial Institution (PFI)
under the RSSF/DCRR;
ii) The PFI should conduct due diligence and obtain
internal approval for the facility.
iii) The PFI submits request to CBN for approval and
release of funds.
9.1 Documents Required
Required documentation for the obligor to access funding includes:
i) Written request from the
project promoter
ii) Certified True Copy of
Certificate of Incorporation
iii) Certified True Copy of
MEMART
iv) Certified True Copy
of Form CAC 1.1
v) Business plan including:
a.
Organizational chart
b.
Health and safety guidelines
c.
3-year financial projections
d.
Detailed vocational and technical training plan
v)
Latest three (3) years
audited financial statements for existing companies or a 6-months Management
Account for new companies;
Section C: Additional
Requirements
10.0 Responsibilities of Stakeholders
10.1 Central
Bank of Nigeria (CBN)
The Central Bank of Nigeria shall:
i)
Articulate clear
guidelines for the implementation of the Facility
ii)
Provide funds for the
Intervention
iii)
Monitor and evaluate
implementation of the Scheme
iv)
Review the Guidelines of
the Facility as may be necessary
10.3 Participating Financial
Institutions
The Participating Financial Institutions shall:
i)
Receive and process
requests for funding under the Scheme
ii)
Exercise due diligence and
care in appraising requests under the Scheme
iii)
Bear the credit risk
iv) Retain copies in both
physical and digital version of the mandate executed by the Borrower.
v)
Disburse funds released
from CBN to the approved beneficiaries as provided in the operational
guidelines
vi)
Monitor the funded
projects and render periodic reports to the CBN.
10.4 Nigeria Electricity Regulatory
Commission (NERC)
NERC shall:
i)
Provide the specification
of meters that can be procured in both phases
ii)
Provide Approved Meter
Supplier List for Phase 0
iii)
Monitor meter deployment
and validate quality and quantity specifications
iv)
Approve the repayment of
loans through NESI collections with the requisite seniority as detailed above.
10.5 Borrowers (DisCos and
Manufacturers)
The Borrowers shall, with respect to this Scheme:
i) Comply with this guideline
and the terms and conditions outlined in the Transaction Documents
ii)
Utilize the funds granted
under the Scheme for the purpose for which it was granted.
iii)
Insure the project being
financed by a reputable Insurance Company
iv)
Adhere strictly to the
terms and conditions of the credit facility
v) Make the project and
records available for inspection/verification by the CBN, PFI and NERC
vi) For the Discos, comply in
full, with all conditions for the implementation of the President's
accompanying directive on Payment Discipline as determined by the Federal
Ministry of Finance and the Central Bank of Nigeria.
11.0 Sanctions arising
from Infractions
i) Diversion of funds by the PFIs shall attract a
penalty at the bank's maximum lending rate at the time of infraction.
ii) Non-rendition of returns or the rendition of false
returns shall attract penalty
iii) In the event of default in loan repayment
(principal and interest), the PFIs shall have the right to charge commercial
interest rate on the amount of default
iv) Unauthorized withdrawals from revenue collection
account - the DMB to refund the money within 48 hours of discovery
v) Banks that flout the Terms & Conditions of the
facility would be sanctioned
12.0 Discontinuation of
Credit Facility
Whenever a loan is repaid or the facility is otherwise
discontinued, the PFIs shall advise the CBN immediately, giving particulars of
the credit facility.
Enquiries
The Director,
Development Finance Department
Central Bank of Nigeria, Abuja.
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