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AfDB approves $210 million loan for Nigeria’s power sector1 minute read

The AfDB funded project will run across seven states and will improve the capacity of power grid where it is most constrained

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AfDB approves $210 million loan for Nigeria’s power sector
(File photo)

The African Development Bank (AfDB) has approved a $210 million loan to help Nigeria upgrade its ailing electricity transmission and distribution network.

The loan to the Transmission Company of Nigeria (TCN) will support the construction of 330KV double circuit quad transmission lines and sub-stations across the country.

The AfDB funded project will run across seven states and will improve the capacity of power grid where it is most constrained.

Nigeria privatised most of its power sector in 2013 but retained control of its monopoly grid, operated by TCN. Most of the country’s power generation is from thermal power stations that use gas.

The creaking power grid has often been blamed for hobbling growth in west Africa’s largest economy.

The project looks to improve power export and regional power system integration to the West African Power pool, especially through Niger and Benin interconnections.

AfDB’s acting Vice President for Power & Energy, Wale Shonibare says implementing the project will increase evacuation from the south towards the north, where power supply is limited.

The project will also improve power export and regional power system integration to the West African Power pool, especially through Niger and Benin interconnections, he adds.

The country’s power output stands at around 4,000 MW. Total power generation capacity is about 7,000 MW but the transmission network cannot cope if plants operate at full tilt.

Nigeria’s privatized power sector typically does not use meters to provide invoices, bill collections are low and energy tariffs have remained fixed for three years.

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South African Airways bailout talks stall

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In light of a poor financial outlook at South African Airways (SAA), including lack of cash for flight operations, the airline has addressed reports of impending bankruptcy, assuring customers and stakeholders that its flights are continuing to operate as normal.

“The airline is aware of media reports suggesting that it will cease operations. SAA is always committed to transparently communicate with all stakeholders, including customers, about any material or significant operational changes that may have an impact on flight schedules,” the airline issued an official press release on January 20, 2020.

In order for the airline to avoid collapse and ensure connectivity, the South African government placed the carrier under bankruptcy protection in December 2019, including a $272 million bailout to keep flights running. With not a single profitable year since 2011 and a bailout sum that amounts to $2 billion through the years, the airline was looking for a strategic partner to help it navigate through tough weather.

The airline’s business rescue practitioners held talks with the government at the weekend to try to find a solution on the funding gap but as of Sunday evening, no solution had been found.

Last week, a senior trade union official said SAA could have to suspend some flights and delay salary payments if the government doesn’t come up with a plan to provide the funds soon.

On Sunday, the public enterprises ministry said it was talking with the National Treasury to raise funds for SAA.

The airline is one of several South African state entities, including power company Eskom, mired in financial crisis after nearly a decade of mismanagement.

Recent reports reveal that at least, a dozen flights to and from the SAA hub in Johannesburg have been grounded.

The cancelled departures include the Monday evening flight to Munich. The loss of this flight will trigger payments of €600 to each passenger under European air passengers’ rights rules.

Ten flights to and from Durban and six links with Cape Town have been axed. In addition, some SA Express services have been grounded. These have SAA flight numbers but are operated by a separate carrier.

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Tanzania to accelerate industrialization with access to more gas supply

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Tanzania is on the verge of being connected with more gas supplies regions. This plan to boost electricity generation was announced by the country’s Deputy Minister for Energy, Subaira Mgalu. The regions involved include Arusha, Dodoma, Tanga, Kilimanjaro and Morogoro.

According to Mgalu, the Tanzania Petroleum Development Corporation (TPDC) has already embarked on a grand infrastructural project to connect natural gas for domestic and industrial use in the Dar es Salaam, Coast, Lindi and Mtwara regions.

“The plan is to reduce dependence of electricity as the only source of power for production by the industries,” he says.

Tanzania is in the process of implementing a mega hydropower at Stiegler’s Gorge along the Rufiji River in the Selous Game Reserve that will produce 2,100 megawatts

The country, with a population of approximately 55 million, has just 1,500MW of installed grid capacity.

Earlier, the Tanzanian President John Magufuli, promised to turn the country into a middle income industrial economy by 2025.

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Kenya seeks $1 billion World Bank loan

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In a bid to cut debt from overseas capital markets after a borrowing binge in recent years,Kenya is in advanced talks with the World Bank for “a fairly priced” loan of up to 100 billion shillings ($991.57 million), nearly half of its required external funding this fiscal year.

The World Bank, which has multiple development funding programmes with Kenya worth billions of dollars, is seen as one of the viable alternatives to commercial debt.

The Washington D.C.-based financier lent money to the Kenyan ministry of finance for the first time last year, changing past practice where it channelled cash straight to the projects, bypassing the Treasury.

The loan size will be determined by how much its funders can put together, says Julius Muia, principal secretary in the Kenyan Finance ministry.

“We are thinking something between 50-100 billion (shillings) depending on what kind of interest there will be”. The loan will be cheaper than commercial debt, in line with the government’s policy of cutting its funding costs, Muia adds.

Kenya became a middle-income country in 2014 after it rebased the economy, meaning it cannot secure funds from the World Bank at the concessional rates offered to low-income states.

The finance ministry has set a budget deficit of 6.3% of GDP for this financial year to the end of June with about 213 billion shillings expected from external sources.

The balance will be raised through Kenya’s first sovereign green bond, with the country taking advantage of next week’s UK-Africa investment summit in London to gauge investor demand for the potential issue.

“It is taking shape as we go,” Muia says.

The Treasury projects that the budget deficit will shrink to 5.7% of GDP in 2020/21. The gap, which peaked at 9.1% of GDP in 2016/17 financial year, is expected to narrow further to the desired level of 3.3% in 2023/24

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