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No to Electricity Tariff Increase

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The intense and justified desire of stakeholders to have uninterrupted electricity power recently received a shock from the Nigerian Electricity Regulatory Commission (NERC), the regulator of the power sector when its Acting Chief Executive, Tony Akah, was quoted to have told members of the Senate Committee on Privatisation that without an increase in electricity tariff or a subsidy from the government, Nigeria would not be able to get steady power supply. He attempted a justification of his position by employing the now old-fashioned arguments of destruction of gas pipelines, huge cost being sustained by power companies, foreign exchange scarcity and fall in the rate of the local currency, Naira, lack of cost-effective tariff or subsidy or incentives that would induce the power companies to commit more money to the sector.

Akah’s solutions include a hike in electricity tariff or provision of subsidy or incentives in the form of tax holidays. He equally proposed that cheap bonds should be provided for the power companies to prevent them from passing high electricity bills to consumers. In proposing subsidy as a solution, he was reported to have asserted that since the petroleum sector was still enjoying subsidy, it would not be out of place for the power sector to enjoy subsidy from the government. He crowned his obvious desperation to advocate and obtain tariff increase for the power operators with the point that “….in the absence of subsidy coming in, in the absence of other mechanism coming in, we (NERC) are bound under the law to provide a tariff that will recover cost of investments.” He was also certain that in the event of no increase in electricity tariff or provision of subsidy or incentives, he has no better ideas on how to make progress with the mandate of his Commission.

It is noteworthy that despite this advocacy on behalf of the private power companies, Senator Ben Murray-Bruce, chairman of the Senate Committee on Privatisation, was reported to have impressed on the NERC the salient fact that most workers in Nigeria have not had pay/wage increase in years; workers operate in the same economic environment as the power companies who want a 200 per cent increase in electricity tariff and also that several businesses in the country have been operating under the same conditions, but have not increase their prices.

Beyond this factual position, it is necessary to point out that the government have unduly indulged and supported the power companies since privatisation. Through the Central Bank of Nigeria (CBN), government first provided them the Power and Airline Intervention Fund operated through the Bank of Industry at a concessionary interest rate of seven per cent per annum. Many stakeholders questioned the rationale for such provision of the fund which balance as at end of December 2015, stood at N249.6 billion. The second intervention fund was N213 billion Nigeria Electricity Market Stabilisation Facility operated through the deposit money banks at a concessionary interest rate of 10 per cent per annum. The fund, a collaborative initiative of CBN, Ministry of Petroleum Resources and Power, the Nigerian Electricity Regulatory Commission and the Nigerian National Petroleum Corporation, was partly aimed at “addressing persistent liquidity challenges facing the power and gas sector, and fast-track the development of a viable and sustainable domestic energy market.”

It is rather unfortunate that these huge tax payers’ funds to the privately-owned power companies have failed to provide the much needed “viable and sustainable domestic energy” in the economy. All Nigerians have received are ‘no power’ and ‘endless excuses,’ now followed by the ‘threat’ that, except tax payers continue to make more funds available, power would remain elusive.

Clearly, the power companies that emerged from the privatisation exercise lack the capacity, in all ramifications, to achieve the objectives of privatising the assets. This situation throws up many questions. For instance, was due diligence conducted before reaching the decisions that produced the companies that won in the privatisation exercise? Did the country do its homework very well to ascertain the problems intended to be solved and was it convinced, beyond all reasonable doubts that the chosen power firms would provide the solutions? And how objective and transparent were the processes that brought about the bid winners. It is advisable that when next the government has the need to embark on serious projects of national interest, enough due diligence backed by non-controvertible practical evidences should be taken into consideration. Essentially, these call for good governance at all times.

Given the difficulties of these times, nothing can justifiably support a tariff hike in the power sector. Practicable ideas on how to revive the economy for sustainable growth are required. What the power companies must do as privately owned organisations is to access the CBN intervention funds or access the capital market for equity and/or bonds. Except their owners are running away from dilution of their shareholding, the Nigerian Capital Market will welcome them. Investment wisdom dictates that one per cent share holding in a performing company is far better than 100 per cent ownership of a non-performing business. The companies must also build up their capacity in human capital, equipment and technology resources.

As for the government, it is high time an integrated power mix was pursued. The country is in a position to tap from solar, wind, hydrocarbon resources alongside gas to bring light to Nigeria in significant quantity and quality levels. Besides, the government has the right to diligently find capable power companies across the globe and license them to get this electricity deficit stigma off the neck of Nigeria. It is also incumbent on government in its bid to improve the power situation, to pay attention to how the federating units in the country should be empowered to provide power within their areas of jurisdiction. The competition this will bring about will produce better services to the consumers.

Finally, regulators that seem to or indeed, lack ideas on possible ways forward for power availability, sustainability and affordability, should desist from threats and refrain from advocating against the people the law requires them not only to serve but to protect.

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

Global Oil Drops as Coronavirus Infections Rises in India and Other Nations

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Crude oil

Oil prices declined on Monday during the Asian trading session amid rising concerns that the surge in coronavirus in India and other nations could force regulators to enforce stronger measures at curbing its spread and eventually affect economic activity and drag on demand for commodities like crude oil.

Brent crude oil, against which Nigerian oil is priced, declined by 22 cents or 0.33 percent to $66.55 per barrel at 8:19 am Nigerian time on Monday, following a 6 percent surge last week.

The US West Texas Intermediate (WTI) declined by 18 cents or 0.29 percent to $62.95 per barrel, after it gained 6.4 percent last week.

The decline was after India reported 261,500 new coronavirus infections on Sunday, taking the country’s total cases to almost 14.8 million, second to only the United States that has reported over 31 million coronavirus infections.

“With … a resurgence of virus cases in India and Japan, topside ambitions continue to run into walls of profit-taking,” said Stephen Innes, chief market strategist at Axi.

Businesses in Japan believed the world’s third-largest economy will experience a fourth round of coronavirus infections, with many bracing for an additional slow down in economic activity.

While Japan has had fewer COVID-19 cases when compared with other major economies, concerns about a new wave of infections are fast rising, according to responses in Reuters poll.

On Tuesday, April 20, 2020, Hong Kong will suspend all from India, Pakistan and the Philippines because of imported coronavirus infections, authorities stated in a statement released on Sunday.

India’s COVID-19 death rose by a record 1,501 to hit 177,150.

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Global Markets Near Record Peaks and Will Get Stronger: deVere CEO

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As the FTSE 100 hits 7,000 points for the first time since the Covid pandemic, global stock markets are poised to “get even stronger”, says the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The observation from Nigel Green, the chief executive and founder of deVere Group, comes as London’s index jumped over the important threshold in early trading in London, gaining over 0.5% to 7024 points.

Mr Green notes: “London’s blue-chip index is up 40% since the worst lows of the pandemic.

“This landmark moment represents the wider optimistic sentiment gripping global markets which are near record peaks.

“We can expect global stock markets to get even stronger as investors look to seize the opportunities from economies reopening.

“They are looking towards economies rebounding in a post-pandemic era due to the monetary and fiscal stimulus, pent-up cash and demand, and strong corporate earnings.

“The current ultra-low interest rate environment and the under-performance of bonds will also act as a catalyst for stock markets.”

However, the CEO’s bullish comments also come with a warning.

“I would urge investors to proceed with caution as there are some headwinds on the horizon, including relations between the U.S. and China, the world’s two largest economies, which could be coming to a tipping point in coming weeks.

“As such, in order to capitalise on the opportunities and mitigate risks, investors must ensure proper portfolio diversification.”

Mr Green concludes: “A variety of factors are going to drive global stock markets. Investors will not want to miss out and should work with a good fund manager to judiciously top-up their portfolios.”

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Refinitiv Expands Economic Data Coverage Across Africa

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Building on its commitment to drive positive change through its data and insights, Refinitiv today announced the expansion of its economic data coverage of Africa. The new data set allows investment managers, central bankers, economists, and research teams to use Refinitiv Datasteam analytical data for detailed exploration of economic relationships and investment opportunities among data series covering the African continent.

Securing reliable, detailed, timely, locally sourced content has not been easy for economists who have in the past had to use international sources which often can take many months to update and opportunities to monitor the market can be missed. Because Africa is a diverse continent, economists and strategists need more timely access to country-specific data via national sources to create tailored business, policy, trading and investment strategies to meet specific goals.

Africa continues to develop critical infrastructure, telecommunications, digital technology and access to financial services for its 1.3bn people. The World Bank estimates that over 50% of African inhabitants will be under 25 by 2050. This presents substantial opportunities for investors who can spot important trends and make informed decisions based on robust and timely economic data.

Stuart Brown, Group Head of Enterprise Data Solutions, Refinitiv, said: “Africa’s growing, dynamic and fast evolving economies makes it a focal point for financial markets today and in the coming decades.  As part of LSEG’s commitment to empowering the global markets with accurate and timely data, we are excited about making these unique datasets available via the Refinitiv Data Platform. Our economic data coverage of Africa will provide our customers with deeper and broader inputs for macroeconomic analyses and enable more effective investment strategies and economic research.”

Refinitiv Africa economic data coverage:

  • Africa economics content comprises around 500,000 nationally sourced time series data covering 54 African nations
  • Content is sourced from national statistical offices, central banks and other key national institutions
  • The full breadth of economics categories in Datastream including national accounts, money and finance, prices, surveys, labor market, consumer, industry, government and external sectors
  • International sources including OECD, World Bank, IMF, African Development Bank, Oxford Economics & more provide comparable data & forecasts across the continent

Refinitiv® Datastream® has global macroeconomics coverage to analyze virtually any macro environment, and better understand economic cycles to uncover trends and forecast market conditions. With over 14.2 million economic times series map trends, customers can validate ideas and identify opportunities using Refinitiv Datastream. Access its powerful charting tools, 9,000 pre-built chart templates and chart studies for commonly used valuation, performance, and technical and fundamental analysis.

 Refinitiv continually grows available data – the China expansion in 2019 covered a unique combination of economic and financial indicators. Refinitiv plans to expand Southeast Asia covering Thailand, Vietnam, Philippines and Malaysia with delivery expected in 2021. This ensures that Refinitiv will have much needed emerging market economic content.

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