Local lenders currently participating in the Central Bank of Nigeria’s Electricity Market Stabilisation Facility (CBN-NEMSF) have received some strict compliance rules and possible sanctions that would follow any breach.
Going forward, a deposit money bank (DMB) which utilizes monies received under the CBN- NEMSF and fails to repay or set off any existing or future secured or unsecured obligations or liabilities of any of the Market Participants, would pay a penalty of N2 million. It will also be instructed by the refinancer to refund the funds with interest at the bank’s maximum lending ratewithin two days.
Further Infraction would lead to the termination of the DMB’s participation as a Mandate Bank, the CBN says.
The set of sanctions contained in a memo to banks signed by Kevin Amugo, CBN Director, Financial Policy and Regulation Department is coming about two years after the fund was launched to address shortfalls in power sector revenues caused by immediate adjustments in the electricity tariffs as well as gas debts.
The new sanctions, inside sources say, became necessary, following many violations witnessed and accusations that the regulator was not disbursing the funds as fast as it should.
In the new rules, the CBN warns that any lender which fails to remit repayment sums due under the CBN-NEMSF and held by the Collections Banks and the Principal Collection Bank in breach of the provisions of the FundTransaction Documents, or does so late, would be made to pay a penalty of N2 million and would be instructed by the Refinancer to immediately transfer the funds into a specified account with interest at the bank’s maximum lending rate for the number of days the infraction persist. The lender would also be terminated as a mandate bank on subsequent infractions.
If a Collection Bank fails to provide the Refinancer with a register of all accounts operated by a Distribution Company (DISCO) and domiciled with it, or fails to disclose all existing Feeder Collection Account in respect of each DISCO in accordance with the terms of the Accounts Administration Agreement, the DMB would pay a penalty of N10 million and would provide the information within two working days.
Further Infraction would lead to the DMB’s withdrawal from participation as a Mandate Bank.
The CBN likewise instructed that where a DMB is found to have provided false information to the Refinancer, a sanction would be applied as applicable under the CBN Act and/or BOFIA.
at the launch of the NEMSF in 2014, authorities said it would help resolve liquidity challenges in the electricity sector and particularly settle approximately N36.9 billion legacy debts owed to gas suppliers by the power sector.
at the launch of the NEMSF in 2014, authorities said it would help resolve liquidity challenges in the electricity sector and particularly settle approximately N36.9 billion legacy debts owed to gas suppliers by the power sector.
It was estimated that the commitment would bring to the grid, an additional 2.5 billion cubic feet per day of gas over the period, from 2014 till 2017 – with over 80 percent of this gas anticipated to go to the power sector and support an additional 5 to 6 gigawatts, relative to today’s capacity.
The facility has faced a series of challenges since it was launched two years ago, leading to the CBN suspending disbursements to tidy loose ends and ensure that set goals are met. The disbursement of the facility was however continued earlier in the year with stricter compliance rules.
The CBN now says that any DMB which does not comply with a request by the Refinancer/Administrator to provide copies of bank statements for any of the Discos Accounts maintained by it, and such other information relating to the transactions effected or to be effected on the Transaction Accounts within five business days from date of such request, would first of all get a letter instructing that the infraction be remedied within two working days.
The CBN will be notified of the infraction, but failure to comply within two working would attract a financial penalty of a minimum of NGN 500,000 daily until the infraction is remedied.
For further infractions, a financial penalty of a minimum of N500,000 daily will be levied on each account that such infraction is committed, until the act is remedied.
For further infractions, a financial penalty of a minimum of N500,000 daily will be levied on each account that such infraction is committed, until the act is remedied.
“If there is a further infraction by the DMB after payment of the above financial penalty, the DMB’s participation as a Mandate Bank under the CBN-NEMSF shall be terminated,” Amugo noted in the five-page memo posted on the CBN website.
Onyinye Nwachukwu
