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Nigeria’s Refineries More of Liabilities than Assets

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  • Nigeria’s Refineries More of Liabilities than Assets

An energy expert, Mr. Dan Kunle has said that Nigeria’s three refineries in Port Harcourt, Kaduna and Warri are more of liabilities than assets, thus questioning the government’s continued insistence on holding on to them.

Kunle, who spoke on the background of recent debates generated from suggestions by Aliko Dangote and some others that the federal government should consider selling its stakes in some national assets to raise money to reflate the country’s economy, said that the three refineries have remained unprofitable and drainpipes on the country’s finances.

He explained that a continued politicisation of the sale of the refineries was not in the interest of the country, adding that their values would continue to decline for as long as they are left operating below par.

According to Kunle, “The more you politicise the privatisation of the three or four refineries, the more those refineries are technically going obsolete and into decadence that no credible investor will come near them anymore.”

“In fact, they become worthless because they have become technically insolvent. When you have assets that have become technically insolvent, it means, if you want to buy it you are buying liability because all the equipment you are supposed to produce with are obsolete.

“They have decayed, corrosion has taken place. That means you are going to invest money in building a new refinery. So, why will an investor come and take such a technically liable refinery,” Kunle added.

He said beyond the technical insolvency, the refineries are also socially insolvent, insisting that any investor who takes them up will have loads of labour and social issues to deal with.

“The labour problem you are going to have in the refineries, unless government insulates you away from all these labour issues, and take away all the staff and pay them. These social problems include the community you are going to interface with, because you need their social license to operate there,” he added.

Speaking then on the debate about the suggestions made by Dangote, he said: “All these noise that people are making, if you get down to the details, you will see that there is no refinery selling. They are all technically insolvent.

“Take the case of NITEL, there was no equipment there. The buyer of NITEL only bought the spectrum more or less and may be some old buildings that were harbouring those base stations.”

“When Nigerians are sentimentally attached to all these things, I sympathise with them because of one reason – they feel they have been short-changed. There are certain things that must be explained in the right perspective to the people but we mix up things, we jaundice information,” he said.

“If the labour wakes up and say don’t sell our patrimony, your children and everybody is going into more deficit by keeping that asset. We could not run Nigerian Airways. Government in this part of the world and anywhere in the world is not meant to run businesses.

“Aliko Dangote is building a refinery that is going to produce near sufficiency of petroleum products to the market. Anybody who decides to buy the three existing refineries will have to invest money to upgrade the refineries to a standard that can produce up to 70 and 80 per cent of installed capacity.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Federal Government Appeals to Electricity Union Amid Tariff Hike Tensions

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The Federal Government has made a direct appeal to the National Union of Electricity Employees (NUEE) amidst rising tensions over the recent hike in electricity tariffs.

The plea comes as the union continues to voice its dissatisfaction with the government’s decision to remove the subsidy on the tariff payable by Band A customers, warning of potential service withdrawal if the decision is not reversed.

In an interview with our correspondent, Adebiyi Adeyeye, the National President of the NUEE, reiterated the union’s stance against the increase, citing the impracticality of expecting their members to collect higher tariffs from customers without a proportional improvement in service.

Adeyeye emphasized the union’s concerns over the discrepancy between the promised 20 hours of daily power supply and the actual delivery, which he deemed “not feasible” due to existing infrastructural limitations.

The Federal Government, represented by Minister of Power Adebayo Adelabu, called for understanding and patience from the union. Speaking through his media aide, Bolaji Tunji, Adelabu assured that efforts were being made to improve electricity supply across the nation. He emphasized the necessity of these changes for the country’s long-term economic growth and job creation.

“We just want to appeal to the labor union to understand the context of these changes. It’s about working together to address the underlying issues within the power sector. It is not anybody’s joy that there are blackouts all the time,” Adelabu stated.

He added that the steps being taken would ultimately benefit the economy and urged the union to bear with the government during this transitional phase.

Adeyeye maintained that the union’s primary objective is to safeguard the well-being of its members, who are facing increased threats due to the tariff hike.

He stressed the need for immediate action from the government to resolve the issues, stating that the union would withdraw its services if necessary.

As the standoff continues, the public watches with interest, hoping for a resolution that will avoid disruptions to the country’s power supply and maintain a harmonious relationship between the government and electricity workers.

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Minister of Power Pledges 6,000 Megawatts Electricity Generation in Six Months

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Adebayo Adelabu has made a bold pledge to ramp up electricity generation to 6,000 megawatts (MW) within the next six months.

This announcement comes amidst ongoing efforts to tackle the longstanding issue of inadequate power supply that has plagued the country for years.

During an appearance on Channel Television’s Politics Today program, Adelabu said the government is committed to resolving the issues hindering the power sector’s efficiency.

He expressed confidence in the administration’s ability to overcome the challenges and deliver tangible results to the Nigerian populace.

Currently, Nigeria generates and transmits over 4,000MW of electricity with distribution bottlenecks being identified as a major obstacle.

Adelabu assured that steps are being taken to address these distribution challenges and ensure that the generated power reaches consumers across the country effectively.

The minister highlighted that the government has been proactive in seeking the expertise of professionals and engaging stakeholders to identify the root causes of the power sector’s problems and devise appropriate solutions.

Adelabu acknowledged the existing gap between Nigeria’s installed capacity of 13,000MW and the actual generation output, attributing it to various factors that have impeded optimal performance.

Despite these challenges, he expressed optimism that the government’s initiatives would lead to a substantial increase in electricity generation, marking a significant milestone in Nigeria’s energy sector.

Addressing concerns about the recent decline in power generation due to low gas supply, Adelabu assured Nigerians that measures are being taken to rectify the situation.

He acknowledged the impact of power outages on citizens’ daily lives and reiterated the government’s commitment to providing stable electricity supply within the stipulated timeframe.

The Minister’s assurance of achieving 6,000MW of electricity generation in the next six months comes as a ray of hope for millions of Nigerians who have long endured the consequences of inadequate power supply.

With ongoing reforms and targeted interventions, there is optimism that Nigeria’s power sector will witness a transformative change, ushering in an era of improved access to electricity for all citizens.

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Nigeria’s Economic Woes to Drag Down Sub-Saharan Growth, World Bank Forecasts

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The World Bank’s latest report on the economic outlook for Western and Central Africa has highlighted Nigeria’s sluggish economic growth as a significant factor impeding the sub-region’s overall performance.

According to the report, while economic activities in the region are expected to increase, Nigeria’s lower-than-average growth trajectory will act as a hindrance to broader economic expansion.

The report indicates that economic activity in Western and Central Africa is set to rise from 3.2 percent in 2023 to 3.7 percent in 2024 and further accelerate to 4.2 percent in 2025–2026.

However, Nigeria’s growth, projected at 3.3 percent in 2024 and 3.6 percent in 2025–2026, falls below the sub-region’s average.

The World Bank underscores the importance of macroeconomic and fiscal reforms in Nigeria, which it anticipates will gradually yield results.

It expects the oil sector to stabilize with a recovery in production and slightly lower prices, contributing to a more stable macroeconomic environment.

Despite these measures, the report emphasizes the need for structural reforms to foster higher growth rates.

In contrast, economic activities in the West African Economic and Monetary Union are projected to increase significantly, with growth rates of 5.9 percent in 2024 and 6.2 percent in 2025.

Solid performances from countries like Benin, Côte d’Ivoire, Niger, and Senegal are cited as key drivers of growth in the region.

The report also highlights the importance of monetary policy adjustments and reforms in supporting economic growth.

For instance, a more accommodative monetary policy by the Central Bank of West African States is expected to bolster private consumption in Côte d’Ivoire.

Also, investments in sectors such as agriculture, manufacturing, and telecommunications are anticipated to increase due to improvements in the business environment.

However, Nigeria continues to grapple with multidimensional poverty as highlighted by the National Bureau of Statistics.

Over half of Nigeria’s population is considered multidimensionally poor, with rural areas disproportionately affected. The World Bank underscores the need for concerted efforts to address poverty and inequality in the country.

Sub-Saharan Africa as a whole faces challenges in deepening and lengthening economic growth. Despite recent progress, growth remains volatile, and poverty rates remain high.

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