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DISCOs Monthly Revenue Shortfalls Rise to N25bn in 2016

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Electricity
  • DISCOs Monthly Revenue Shortfalls Rise to N25bn in 2016

Electricity Distribution Companies, DISCOs’ remittances to Nigeria Bulk Electricity Trading, NBET, dropped to about 35 percent in 2016 from an average of 65 percent in 2015, with monthly revenue shortfalls rising to N25 billion in 2016 as against N9 billion in 2015.

According to a report by Proshare, a Nigerian financial information service firm, “The revenue shortfall of the DISCOs has triggered systemic risk in the sector since the generation companies, GENCOs, who rely on the DISCOs for revenue, have largely been stifled.

“The core drag at the bottom of these challenges relates to revenue and funding strain, despite the steps taken to improve operations of the GENCOs and DISCOs as well as the TCN failure to address the huge debt profile, foreign exchange burden, revenue shortfall and working capital of companies, expectations of momentous advance by firms will be a head in the clouds,” it stated.

The report also said that firms were already facing difficulties in servicing over N700 billion loans which they collectively took to purchase the plants when they were privatised in 2013, thus leading to liquidity crisis that had reduced their ability to pay for gas supplies and in whole threatening to completely undermine the electricity value chain and ability to continue to serve customers.

Upward tariff adjustments

The Proshare report further stated: “Given public resistance to upward tariff adjustments to meet revenue shortfalls, the power companies have clamoured for Federal Government intervention which would come in form of subsidy.

“Indeed, based on the current power sector model (2005), revenue shortfalls, were anticipated and modelled as high ATC&C losses embedded in the entire value chain, were to be funded by the Federal Government through monthly subsidies.” The proposed rulemaking on transitional trading arrangement and financial settlement system published by Nigeria Electricity Regulation Commission, NERC, in July 2008 states that.”

Given the revenue inadequacy which will now be funded by the subsidy in the first three years of the MYTO, the shortfall between the obligated payment and actual revenues collected, will be met by the Government monthly.”

In the event of revenue shortfalls from DISCOs, the Bulk Trader was expected to use its capitalisation to bridge the revenue shortfall and ensure GENCOs and other market participants are paid in full for power generated.

NBET overtime, has been deficient in meeting its obligations due to under-capitalisation. Consequently, NBET sought to issue a N300 billion medium-term note (MTN) with an embedded risk guarantee from the FG to enhance its capitalisation but was rebuffed by the National Assembly in April 2016.

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.

Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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Crude Oil

OPEC Says Uncertainties Remain High in 2021

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Nigeria's economic Productivity

OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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Crude Oil

Brent Crude Oil Rose to $56.25 Per Barrel

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oil

Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

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