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Fuel crisis throws spotlight on proposed IPP for banks

 

As more banks announce a return to normal services after the end of a nationwide fuel distribution strike that forced them to close their generator-dependent branches early last Monday, analysts have pointed out that the crisis underlined the need for the industry to aggressively pursue the plan to establish an Independent Power Project (IPP) for lenders in Lagos.
Under the leadership of its former Governor, Lamido Sanusi, the CBN had in 2010 revealed plans to set up an IPP to provide power to all banks operating in Lagos as a pilot cluster. According to the apex bank, the project coupled with its shared services initiative, would lead to a drastic reduction of overhead costs and ultimately reflect positively on the cost of funds.
Indeed, the regulator had projected that the measures would reduce the overhead costs of banks by 30 per cent by 2013.

Segun Agbaje
Segun Agbaje

Senior Financial Analyst at Berta Consultants, Ben Mordi, argued that if the IPP had been completed, the impact of the fuel shortages on the banking industry would not have been so serious as to lead to some of the country’s biggest lenders shortening opening hours on Monday.
He said: “It is no longer news that some banks’ branches spend close to N400, 000 monthly to purchase diesel to power their generators. In fact, branches that have more than one generator spend more than this amount. With the IPP, banks will save what they are currently spending to generate their own power. This will eventually result in lower interest rates.”
Following a worsening of the fuel scarcity last weekend, banks on Monday announced that they were shortening their opening hours until the situation improved.
Guaranty Trust Bank (GTBank) started it all when it said, via a statement on Twitter that, “The current shortage of petroleum products in the country has limited our ability to supply diesel to all our branches in order to continue normal branch operations. Due to this we unavoidably have to close our branches nationwide at 1pm from Monday 25th May, 2015.”
Notices followed this via emails and text messages by other banks such as Union Bank, First Bank, Access Bank and First City Monument Bank (FCMB) to their customers, announcing that they would close early due to the fuel crisis.

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