Markets

Fashola Assures Sector Operators, Stakeholders of Improved Power, Gas Supply in 2017

Published

8 years ago

January 21, 2017

The Minister of Power, Works and Housing, Babatunde Fashola

Fashola Assures Sector Operators, Stakeholders of Improved Power, Gas Supply in 2017

The Minister of Power, Works and Housing, Mr. Babatunde Fashola SAN, has asked stakeholders in the Power Sector to look forward to the implementation of policies that would improve gas supply and liquidity as well as the completion of several power projects by the Federal Government in 2017.

Fashola, while making his Opening Address as Guest Speaker at the January edition of the Nextier Power Dialogue held at the Thought Pyramid Art Centre, said the Ministry of Power, Works and Housing along with other agencies of the Federal Government, like Ministry of Finance and the World Bank, had put together a policy framework that would help establish stronger and better institutional framework needed to tackle the challenges in the Power Sector.

According to the Minister, such policies would help realise a deepening of metering, sanctions for energy theft and better contract performance from Operators in the Power Sector as well as help achieve the financial strengthening of the Nigerian Bulk Energy Trading PLC (NBET).

He explained that he could not discuss the policies yet in details at the event because they were in the process of being presented for consideration and approval by the Federal Executive Council, but however, assured that when implemented, they would take the nation to more gas and assure payment to gas suppliers and generation companies which was the way forward.

He told his audience, “Clearly these policies constitute the way forward and ensures that everybody in the system gets paid. If we have that, at least, we can be sure that those who are supplying gas will not be shutting down because their creditors are pulling them. Then we go to the other side that are angry to see what we can do because gas problem is exacerbated on both sides”.

While explaining the current decreased power supply and outages across the country, he blamed the sabotage of gas pipelines by “some of our angry brothers”, adding that because of the debt owed gas companies by the DisCos, the companies also withheld supply of gas.

The Minister, who noted that there had been some outages across the country in the last 24 hours, however, assured Nigerians that himself, the Permanent Secretary and other officials of the Ministry were trying to see what they could do to address the situation.

Emphasising the need to increase liquidity in the sector, Fashola explained that as a result of the frequent power outages due to the sabotage of power assets, the operators along the power chain were being owed as distribution companies could not pay generating companies who equally could not pay gas suppliers who, in turn, could not pay their bankers.

The Minister pointed out that the debts had been accumulating since 2015 leading to gas companies currently shutting their tanks and forcing power again down to 2,000MW.

In line with increasing liquidity in the sector, Fashola also said Government intended to quickly complete the audit of its Ministries, Departments and Agencies (MDAs) to enable it pay proven debts owed the Operators in the sector adding that the payment had been delayed as a result of lack of authentic debt figures.

The Minister further explained, “You have heard that Federal Government is owing and all that; but you know, we don’t have the authentic figures and until we have that I cannot go and tell President Buhari that we want to pay ‘about…’. He will say we are not serious. So we expect to see the completion of that so that we can pay what is proven debt”.

According to him, Government also intended to see to the financial strengthening of the Nigerian Energy Bulk Trading (NBET), the bulk trader who stands as the interim partner to ensure that everybody that was doing their part in the system was paid, adding that once that was achieved Government would then insist on better contract performance and sanctions for non-compliance.

On calls for the cancellation of the Privatisation contract in the Power Sector, he reiterated his averseness to the call arguing that the country would by such action be sending negative signals to foreign investors that she had no respect for agreements.

Fashola pointed out that the action would only take the nation backward, adding that the programme was just three years old and needed time to mature, as, “We should think on what to do to make it work better instead of cancelling it”.

On what to expect in the New Year in terms of projects aimed at increasing power supply, he listed the Kudenda Transmission Project in Kaduna, which he said would be completed shortly as well as other power assets in Lagos, Sokoto and many more across the country.

According to him, “There are many power projects that will come on stream this year like the Gurara hydro power that we should begin to benefit from it by the end of this quarter because the power plant has been completed remaining just to transmit to Kudenda in Kaduna. Katsina Wind Mill will also be completed this year; the equipment for the completion have left Europe for Nigeria. Kaduna’s 215MW will also come on stream this year, and few others”.

Expected this year also in the power sector, the Minister continued, was better governance and regulation in stronger institutional frameworks as the Nigerian Energy Regulatory Commission (NERC), the regulators in the Sector, was being strengthened to do its work better and more efficiently.

Fashola declared, “They (the NERC Chairman and Commissioners) are the ones doing some of the things you have asked me to come and do; loss reduction, more sanctions for energy theft, more metering and more audit of DisCos to see what their books looked like would be expected this year as well.

“In the last one year that we have been in office, we have got to an all-time high of 5074MW. Nigeria has never reached there before. But immediately we got that, do you know what happened? They started breaking the gas pipelines one by one. We had 14 attacks in about two months.

“We need to get power from wherever we can. So, we said the first step is Incremental Power wherever we could get it; as long as it is legitimate, it is safe, it is environmentally compliant, we would put it on. But some of our brothers are angry; and I continue to tell them anger is not a strategy”, he said adding, however, “I know they will not be angry forever”.

He appealed for peace and understanding among the “angry brothers”, appealed to their relations and friends to persuade them to embrace peace adding, “While they are angry, they are punishing us, they are punishing themselves, they are punishing everybody”.

“You hear us announcing that we commissioned one transmission project or the other, you see me going round for these commissioning; that is the Grid evolving. Today, at its most frugal, it would support 6,500MW; pushed to its limit it would carry 7,200MW. So it is not true when you hear that the grid capacity is not more than 5,000MW. It is growing every day and more projects are coming up. We have completed some and more are still coming up. So that is where we are.

“Now it means that notionally, if we had those 3,000MW plus 4,000MW we were already at 7,000MW. But we would not have it because some of our family members are angry because of the problems, power came down to about 2,000MW and once the power goes below 3,000MW, the Grid would begin to react”, he said.

The Minister decried the lack of accurate demographic data in the country, which according to him, had both resulted in improper planning and hampered the delivery of electricity in the country over the years adding that it was important to know the accurate population of the country in order to know how much power to provide, and the number of consumers to be supplied electricity.

On rural electrification, Fashola revealed that the existing contracts for 2000 constituency electricity projects under the Rural Electrification Agency (REA) would soon be completed, adding that the government would be looking at expanding the generation, transmission and distribution aspects within the electricity value chain by encouraging more technical partners and other investors to come into the power sector and explore other energy resources in more secured environments across the country.

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Samed Olukoya

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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Energy

Egypt Increases Fuel Prices by 15% Amid IMF Deal

Published

2 days ago

July 25, 2024

Samed Olukoya

Egypt has raised fuel prices by up to 15% as the country looks to cut state subsidies as part of a new agreement with the International Monetary Fund (IMF).

The oil ministry announced increases across a variety of fuel products, including gasoline, diesel, and kerosene.

However, fuel oil used for electricity and food-related industries will remain unaffected to protect essential services.

This decision comes after a pricing committee’s quarterly review, reflecting Egypt’s commitment to align with its financial obligations under the IMF pact.

Egypt is in the midst of recalibrating its economy following a massive $57 billion bailout, orchestrated with the IMF and the United Arab Emirates.

The IMF, which has expanded its support to $8 billion, emphasizes the need for Egypt to replace untargeted fuel subsidies with more focused social spending.

This is seen as a crucial component of a sustainable fiscal strategy aimed at stabilizing the nation’s finances.

Effective immediately, the cost of diesel will increase to 11.5 Egyptian pounds per liter from 10.

Gasoline prices have also risen, with 95, 92, and 80-octane types now costing 15, 13.75, and 12.25 pounds per liter, respectively.

Despite the hikes, Egypt’s fuel prices remain among the lowest globally, trailing only behind nations like Iran and Libya.

The latest increase follows recent adjustments to the price of subsidized bread, another key staple for Egyptians, underscoring the government’s resolve to navigate its economic crisis through tough reforms.

While the rise in fuel costs is expected to impact millions, analysts suggest the inflationary effects might be moderate.

EFG Hermes noted that the gradual removal of subsidies and a potential hike in power tariffs could have a relatively limited impact on overall consumer prices.

They predict that the deceleration in inflation will persist throughout the year.

Egypt’s efforts to manage inflation have shown progress, with headline inflation slowing for the fourth consecutive month in June.

This trend offers a glimmer of hope for the government as it strives to balance economic stability with social welfare.

The IMF and Egyptian officials are scheduled to meet on July 29 for a third review of the loan program. Approval from the IMF board could unlock an additional $820 million tranche, further supporting Egypt’s economic restructuring.

Crude Oil

Oil Prices Rise on U.S. Inventory Draws Despite Global Demand Worries

Published

2 days ago

July 24, 2024

Samed Olukoya

Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.

Commodities

Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

Published

2 days ago

July 24, 2024

Samed Olukoya

Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.