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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.

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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