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World Bank Group and Nigerian Government Discuss the Power Sector Recovery Programme (PSRP)

By Federal Ministry of Power, Works & Housing
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ABUJA, Nigeria, November 28, 2017 – The World Bank Group and the Federal Government of Nigeria concluded two days of high-level consultations on the Power Sector Recovery Programme (PSRP). The PSRP is a comprehensive programme of policy, legal, regulatory, operational and financial interventions that will restore service efficiency and long-term power sector viability. The measures that will be implemented through 2021, are aimed at improving transparency, service delivery and re-establishing investor confidence, and hence, investment in the sector. Accelerating electricity access including through off-grid public private partnerships is an important component of the PSRP.

The meetings assessed progress in implementing the Programme and followed on similar high-level meetings that took place in Abuja in December 2016 and in Washington during the 2017 World Bank and IMF Spring Meetings.

The Federal Government of Nigeria clarified progress made to date and next steps on key components of the PSRP. The Federal Government has prepared a financing plan to ensure financial sustainability of the power sector and included it in the Medium-Term Expenditure Framework and Fiscal Strategy Paper submitted to the National Assembly in October 2017. The financing plan will be monitored regularly and incorporate contingencies should the sector shortfall deviate from the base case assumptions until retail tariffs are adjusted in line with improved service delivery to attain cost recovery by 2021.

The PSRP envisages measures to contain costs and carefully manage contingent liabilities to ensure cost-reflective and affordable tariffs. In this context, it was agreed that existing generation infrastructure assets will need to be optimized before the sector assumes new financial obligations that could not be supported.

Furthermore, least cost planning for the interconnected grid system will be institutionalized and its governance arrangements elaborated in the PSRP. The Federal Government anticipates that all arms of Government and the National Assembly will continue to advance the Programme.

The parties agreed that the process of “Market Reset”, redefining the revenue requirement of the sector based on new performance parameters and detailed investment plans, will be implemented rigorously, transparently and in a highly consultative manner. A communications campaign has commenced that will facilitate the participation of all stakeholders including consumers. The Market Reset is to be led by the Nigerian Electricity Regulatory Agency (NERC) whose independence is recognized by the Federal Government and which needs to have sufficient resources with which to discharge its mandate.

The World Bank delegation informed the Federal Government that it was pleased with progress in implementing the early actions of the PSRP. The World Bank is committed to assisting the Federal Government with Programme implementation working closely with the PSRP Implementation Monitoring Team, which reports directly to the His Excellency, the Vice-President of Nigeria. The World Bank will
continue the preparation of the proposed US$ 1 billion Performance Based Loan (PBL) to support the Programme. The Federal Government and the World Bank Group agreed on the necessary next steps to present the PBL to the World Bank's Board of Executive Directors for their consideration. “This Administration is fully committed to implementing the PSRP. We believe that the PSRP is the clearest pathway to reform the power sector and its success is contingent on a strict adherence to performance and Programme implementation monitoring which I will continue to give a priority from my office” said H.E. Yemi Osinbajo, SAN Vice President of the Federal Republic of Nigeria

“It (PSRP) is an intervention that we have been working on in collaboration with the Federal Ministry of Power, Works and Housing and the World Bank. We are very confident that this laudable and vital Programme will make a fundamental difference in the economy in particular and the country in general.” said H.M. Mrs. Kemi Adeosun, Minister of Finance “The Federal Government is committed to addressing the challenges in the power sector as part of its efforts towards achieving economic recovery and accelerating growth,” said H.E. Babatunde Fashola SAN, Minister for Power, Works and Housing.

"The discussions we had with the Government demonstrated that there is strong momentum in the power sector and Government commitment to taking the critical next steps that will allow us to present the Performance Based Loan to our Board of Executive Directors.” said Riccardo Puliti, World Bank Senior Director for Energy and Extractive Industries. “The Bank recognizes the critical importance of the power sector to private sector financing and investment and we will continue supporting the Government's effort to implementing its Power Sector Recover Programme, thereby de-risking the sector for much needed private capital,” said Rachid Benmessaoud, World Bank Country Director for Nigeria.