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Power: Price of Gas Rises by 60%

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Following the free fall of the naira against the United States dollar, the cost being incurred for the purchase of gas for power generation has risen by about 60 per cent, our correspondent has learnt.

Gas for power generation is denominated in the US dollar but power generation firms pay the naira equivalent.

The Federal Government had, through the Nigerian Electricity Regulatory Commission, in 2014 approved a new gas-to-power pricing benchmark of $2.50 per thousand cubic feet from $1.5 per mcf, taking effect from January 1, 2015.

 Until June 20, 2016, the official exchange rate of the naira to the dollar was pegged at N197-N199/$. But following the liberalisation of the foreign exchange market, the naira has plunged to record lows in recent days.

The naira closed at 314.14 to the dollar on Wednesday at the interbank market.

The Chief Executive Officer, Eko Electricity Distribution Company, Mr. Oladele Amoda, said, “Gas cost for power generation is denominated in dollars.

“It is paid for in naira at the prevailing exchange rate. This creates more liquidity gap in the power value chain. Discos’ revenue shortfall is about N800bn and if the volatile exchange rate and low level grid power are considered, there will be a further dip by N400bn, making a total of about N1tn.

Amoda said the situation would slow down further investment in the sector, and network improvement and metering, adding, “Discos need upward review of tariff now.”

He said, “Power sector requires Presidential approval to exchange dollar at N197 to procure power equipment, cables and meters. Just as approved for the hajj pilgrims. The cost of all categories of transformers, cables, and several other electrical accessories including meter component, has almost doubled.”

The Managing Director, Transcorp Power Limited, one of the generation companies in the country, Mr. Adeoye Fadeyibi, said, “The exchange rate is affecting all of us. The cost of procuring is higher; so, the exchange rate is disturbing everybody.”

The Gencos had recently said the cost of the equipment needed to carry out repairs of turbines and associated auxiliaries in the international market had increased by about 100 per cent in the last three years, arising from the devaluation of the naira.

They said, “Given the fact that the majority of the parts and equipment procured by the Gencos are sourced outside the country, this has had significant impact on the Gencos’ purchasing power and inevitably on their ability to upgrade and maintain their various power plants.”

The firms stated that as of the time of paying for the power assets in 2013, the acquisition financing was largely sourced in dollars, to the knowledge of appropriate government and regulatory agencies.

The Gencos said, “The cost of repaying those facilities has significantly increased by about 100 per cent in the last three years arising from the devaluation of the naira as well.

“This has resulted in additional huge losses with suffocating effects on the Gencos. It is, however, important that there is special consideration for foreign exchange allocation to support the power sector.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Prepaid Meter is Free, Buhari Warns DisCos, Agents

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President Muhammadu Buhari once again warned Power Distributing Companies (DisCos) and their agents selling prepaid meters to electricity customers against the Federal Government directive that meter is free.

Ahmed Rufai Zakar, the Special Adviser to the President on Infrastructure, who represented Buhari at the FGN/NLC-TUC ad-hoc committee on electricity tariff stakeholders held in Ibadan, Oyo State on Wednesday, said President Buhari understood people’s concerns on issues surrounding electricity and was determined to curb and deal with unscrupulous individuals in the power sector.

He said, “We have made it very clear through the regulators direct order as well as intervention from the Ministry of Power that the meters are to be provided to Nigerians at no cost.

“Even for meters that were paid for, there is the directive from the regulator to the discos that they would need to find a way to reimburse those citizens over time.

“In cases where we find any disco or disco representative selling the meters or exploiting Nigerians to be able to get meters by paying, we would take the full measures of the law.

“The President has mandated that these meters must be free. We have also said that they must come from local manufacturers.

“This would create jobs and revive our industry.”

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Economy

Nigeria’s Real Estate Sector Shrinks by 8.06% in the Third Quarter -NBS

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Economic uncertainty plunged Nigeria’s real estate sector by 8.06 percent in the third quarter of the year, according to the National Bureau of Statistics (NBS).

Nigeria’s statistics office said “In nominal terms, real estate services recorded a growth rate of –8.06 per cent in the third quarter of 2020, indicating a decline of –11.78 per cent points compared to the growth rate at the same period in 2019, and by 9.12 per cent points when compared to the preceding quarter.

“Quarter-on-quarter, the sector growth rate was 18.92 per cent.

“Real GDP growth recorded in the sector in Q3 2020 stood at -13.40 per cent, lower than the growth recorded in third quarter of 2019 by –11.09 per cent points, but higher relative to Q2 2020 by 8.59 per cent points.

“Quarter-on-quarter, the sector grew by 17.15 per cent in the third quarter of 2020.

“It contributed 5.58 per cent to real GDP in Q3, 2020, lower than the 6.21 per cent it recorded in the corresponding quarter of 2019.”

Nigeria’s economy contracted by 2.48 percent in the first nine months following a 6.10 percent and 3.62 percent contraction in the second and third quarters respectively.

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Nigeria Requires N400 Billion Annually to Maintain Federal Roads -Senator Bassey

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The Chairman of the Senate Committee on road maintenance, Senator Gersome Bassey, on Friday said Nigeria requires about N400 billion annually to maintain federal roads across the country.

The Senator, therefore, described the N38 billion budgeted for road repairs in the 2021 proposed Budget as grossly inadequate. According to him, nothing meaningful could be achieved by the Federal Roads Maintenance Agency (FERMA) with such an amount.

He said, “For the 35 kilometres federal roads in the country to be motorable at all times, the sum of N400bn is required on yearly basis for maintenance.”

Bassey “What the committee submitted to the Appropriation Committee in the 2021 fiscal year is the N38bn proposed for it by the executive which cannot cover up to one quarter of the entire length of deplorable roads in the country.

“Unfortunately, despite having the power of appropriation, we cannot as a committee jerk up the sum since we are not in a position to carry out the estimation of work to be done on each of the specific portion of the road.

“Doing that without proposals to that effect from the executive, may lead to project insertion or padding as often alleged in the media.”

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