March 1, 2024

German Chancellor attributes delay in Siemen-Nigerian power deal to funding issue


Oredola Adeola

The German Chancellor, Angela Merkel, has said that the Siemen-Nigeria power project is facing funding challenge, this is even as the Federal Government insists on local content (infrastructure).

She made this known in a conversation with Chimamanda Adichie, Nigeria’s renowned author, at a panel session that focused on women commonalities and differences, held at the Düsseldorf’s Schauspielhaus theatre recently.

Merkel’s response was in reaction to Adichie’s enquiry about the power pact that the Nigerian Government had with Siemens in 2018, to fix the country’s electricity problem.

According to the German Chancellor, fifty percent of the fund was meant to be pulled into infrastructure, noting that both parties are struggling to work out this side of the deal.

Chancellor Merkel who was surprised by the question, noted that she does not have much information about this agreement, but promised to ask Siemens about the progress made on the deal.

She said, “The biggest challenge is funding and the fact that African government usually insists on local content (infrastructure) be used up to fifty percent, and that corporations are struggling to get around this.

“This was the problem in a similar project in Ghana. I will get back to you on this,” she concluded.

President Muhammadu Buhari had in July 2019, signed a power project deal (PPI) with the German firm Siemens AG with the aim of increasing Nigeria’s electricity generation to 25,000 megawatts (MW) in six years. The deal was worth 2 billion dollars.

That event was witnessed by President himself in the presence of Onyeche Tifase, CEO Siemens Nigeria, Alex A. Okoh, Director General of Bureau of Public Enterprises, Joe Kaeser, President and CEO of Siemens AG and Regine Hess, German deputy ambassador to Nigeria, in July 22, 2019.

Government had in that agreement stated that the deal was a “quick-win” measure meant to increase the end-to-end operational capacity of Nigeria’s electricity grid to 7 GW.

The structure of the funding, according to the Government, was 85% from a consortium of banks, guaranteed by the German government through credit insurance firm, Euler Hermes.

The government promised about 15 percent counterpart funding for the project with a 2–3 years moratorium. The fund for the deal also has 10–12 years repayment at concessionary interest rates.

Meanwhile, on July 29, 2020, the Federal Executive Council(FEC) approved the payment of €15.21m (N6,940,081,465.20) offshore and N1.708bn onshore, which was the government’s counterpart funding for the power deal.

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