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Report: Cost of Fuelling Generators Estimated to Hit N5tn by 2017

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Cost of Fuelling generator
  • Report: Cost of Fuelling Generators Estimated to Hit N5tn by 2017

Given the increase in the pump price of petrol and diesel this year, the total amount spent by households and businesses to power their generators may rise to N5trillion by 2017, higher than the N3.5 trillion it was before the price hike, a report has projected.

The Financial Derivatives Company Limited stated this in its latest Business and Economic Bulletin for October obtained recently. The report pointed out that the shortage and unreliability of power and the need for Nigerians to generate their own electricity adds unnecessary cost inefficiencies to households and businesses.

It noted that with companies such as MTN reportedly spending about N8 billion on power generation annually, that shows that the present power situation has negative connotations for business operations and profitability.

In its Ease of Doing Business Report, the World Bank drew a parallel between Nigeria’s frail power sector and its business environment. Accordingly, the procedures, time and costs involved in getting connected electricity, combined with the unreliability of the power supply and the per unit electricity bills are factors that contribute to making Nigeria a tough place to do business.

Using Lagos State as a proxy, the FDC report revealed that it takes 184 days (6 months) on average from the moment you submit an application for electricity connection to initial electricity flow.

In the 2016 World Bank rankings, Nigeria came 182 out of 189 countries in the ‘Ease of getting electricity’ sub- index. Furthermore, Nigeria scores zero out of eight on the reliability of supply and transparency of tariff index.

“The importance of electricity lies in its status as a necessary intermediary in the economy. It does not represent an end in itself but it is required for the success of other initiatives or activities. These activities can generate welfare or leisure, increase efficiency or productivity, and generate income.

“It means that if Nigeria is to realise the dream of becoming the number one Foreign Direct Investment (FDI) destination in the world, with a booming economy and tourism, then something needs to be done about power- and fast! Constant and reliable electricity will cut business costs; this will translate into increased efficiency, productivity, output, job creation and economic activity,” it stressed.

Furthermore, the report stated that the challenges the power sector faces are deep-rooted and multi-faceted.

It explained that at the generation level, the GENCOs continue to produce at sub-optimal levels; saying even if they did not, their total installed capacity would still be unable to meet electricity demands. Outdated technology, poor maintenance, low investments etc. are some reasons for this.

Also, the GENCOs that use natural gas are affected by pipeline vandalism and exchange rate illiquidity, both of which lead to gas shortages and shortfall in generation.

At the transmission level, the national grid’s carrying power is too modest, such that even if GENCOS were to generate more, the grid would not be able to handle it, it further explained. In addition to this, great amounts of electricity are lost in transmission.

“Although TNC claims an average transmission loss of about 8.5 per cent, the loss is estimated to be much greater due to deteriorating infrastructure. Furthermore, the DISCOs battle with customers who do not pay their bills- the biggest culprit being the Nigerian government.

“As at first quarter 2016, the government had about $300 million in unpaid electricity bills. While it is easier for DISCO agents to threaten the aver-age citizen with notices and written warnings, it more difficult to do so with national departments such as the army barracks. Operators also complain that the current tariff levels are not sufficient to break even,” it added.

The Nigerian Electricity Regulation Commission had been ordered to reverse its 45 per cent hike in tariffs by the Federal High Court in Lagos. Backed by the Ministry of Power, the NERC is seeking appeal at the Supreme Court.

“It is no surprise that these energy industry players have huge debt burdens. As at March 2016, GENCOs had outstanding loans of N367 billion in total. TCN and DISCOs have a joint debt of N162 billion. This increases the profitability risk of the sector and discourages further private investments.

“The major problem of the power sector is one of funds and infrastructure, which can only be tackled with investments into procurement, maintenance and operation,” it added.

The government had initiated a N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF), out of which a total of N55.4billion has been disbursed so far. Additionally, according to a Memorandum of Understanding with Chinese firms, about $50 million would be invested into gas infrastructure, pipelines, power etc. If implemented efficiently and completely, this brings large promise to the power sector.

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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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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