CBN threatens banks over Power Stabilization Fund

By Odunewu Segun

Participating deposit money banks that contravenes the terms and conditions of the CBN-Nigerian Electricity Market Stabilisation Facility (CBN-NEMSF) will henceforth be liable to monetary sanctions as well as the termination of participating mandate by the Central Bank of Nigeria.

According to CBN’s Director of Financial Policy and Regulation, Kevin Amugo, in a circular, sanctions that may be imposed are not limited to those listed as it may impose additional sanctions, and in such form as it may deem fit, to include regulatory action against officials of defaulting banks.

The apex bank in the sanctions grid, said the closure of a Transaction Account by a DMB without the prior written consent of the refinancer will attract a fine of N2 million for the first infraction and termination of its mandate at further infractions.

Also, the apex bank said any bank that opens additional bank accounts for a beneficiary distribution company, whether or not for the purpose of receiving payments, fines and fees for electricity consumed by its customers, without the prior written consent of the refinancer, “shall pay a penalty of N2 million on each account opened and shall be instructed by the refinancer to close the account and transfer all funds in the account into the Principal Collection Account (PCA) within 24hours.”

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“If the infraction is not remedied after the expiration of the 24 hours, the bank will be liable to a penalty of N2 million per day for the number of days the account remains open,” the CBN said, adding that any further infraction will result in the “termination of the DMB’s participation as a Mandate Bank under the CBN-NEMSF.”

Recall that one year into the programme, five distribution companies received N41.06 billion; seven generating companies received N18.4 billion while six gas companies received N5.24 billion. In March, 2015, CBN disbursed another total sum of N18.26 billion to the first batch of beneficiaries of the N213 billion NEMSF, which comprised of two electricity Distribution Companies (DISCOs) and three electricity Generation Companies (GENCOs).

Also in June, 2016, CBN disbursed the fourth batch of the fund, giving out N55.456 billion to 24 industry participants; three DISCOS, 14 GENCOS-NIPP inclusive, one service provider; and six GASCOS to further address the challenges of the sector.

The CBN Nigeria Electricity Market Stabilisation Fund (CBN-NEMSF) is aimed at settling outstanding payment obligations due to market participants under the IRP Debts as well as legacy gas debts of the PHCN generation companies owed to gas suppliers and the Nigeria Gas Company.