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Power: Gencos Back Plan to Monitor Discos’ Accounts

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Minister of Power, Works and Housing, Mr Babatunde Fashola
  • Gencos Back Plan to Monitor Discos’ Accounts

Power generation companies in the country on Tuesday declared their support for plans by the Federal Government to centralise and escrow the accounts of the electricity distribution companies.

The Gencos also expressed reservation about claims by the Discos that many consumers across the country hardly pay their electricity bills.

They stated that the failure of the Discos to make the remittances of funds required for the smooth running of the Nigerian electricity supply industry had made the generation firms to be highly indebted to their lenders and had forced about 23 power plants to remain idle.

The debt to the lenders, according to the Gencos, is currently over N500bn, adding that most of the financial institutions that granted credit facilities to the power firms had started threatening them.

Last week, the 11 power distribution companies in the country opposed plans by the Federal Government to centralise and escrow their revenue accounts over poor market performance with respect to their remittances to the Nigerian Bulk Electricity Trading Plc.

The Association of Power Generation Companies, however, blasted the distribution companies for not wanting the government to see their books, whereas they often come out to complain that they were not making profits due to the refusal of consumers to pay electricity bills.

“This must not be allowed to continue, because the poor remittance of market funds by the Discos has prevented the rest of the electricity value chain from meeting up with their operations and also service their liabilities, which includes gas payments,” the Executive Secretary, APGC, Dr. Joy Ogaji, told journalists in Abuja on Tuesday.

“With the dwindling commercial performance in the industry and the inability of some stakeholders in the power sector to meet up infrastructure performance targets due to the decline of market funds and its attendant increased debt profile in the entire value chain of the power sector, the recent development of the Nigerian Electricity Regulatory Commission to escrow the account of the Discos is not just a welcome development, but also a wake-up call to all participants in the electricity market,” she added.

The NBET had repeatedly stated that the distribution companies remitted only 30 per cent of their monthly energy invoices in 2016.

The Executive Managing Director, Market Operator, an arm of the Transmission Company of Nigeria, Mr. Moshood Suleiman, had stated in October last year that if poor revenue collection by the Discos continued, their accounts might be escrowed.

Ogaji explained that in the power value chain, the Gencos were entitled to 60 per cent of funds remittances as they were not just to generate power, but also to pay for gas supply and gas transportation.

She said, “Transmission charge costs 11, per cent, distribution gets 25 per cent, while the remaining four per cent is meant for regulatory charges and the NBET. The revenue referred to by the distribution companies is not their personal revenue but market funds to which they were made trustees to collect and remit.

“But if the trustees can no longer be trusted, then their books must be made open or the accounts escrowed in order to enable us see if what they claim is actually what obtains in the power business, because this entire system is a value chain.

“If centralising the payment system is tantamount to nationalising, the question that comes to mind is: what does selling the electricity and keeping the money all to oneself mean? If the Discos claim they are not collecting enough, then they should open their books to make it plain for all to see and confirm their story. He who asserts must prove.”

The APGC executive secretary stated that the stance of NERC and the Federal Government would send positive signals to potential investors as well as investors in power generation.

When asked of the N701bn recently approved for the Gencos by the Federal Government, Ogaji said the power firms had yet to access the fund and that they did not really understand how it would be used.

She said, “The N701bn is for services to be provided between 2017 and 2019. It doesn’t cover the over N500bn debt owed the Gencos by the sector, which has made our lenders to threaten us. And it is important to state that we were not consulted before the government arrived at that N701bn figure.

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.

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Economy

IMF Staff Completes Virtual Mission to Lesotho

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IMF

Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr. Aslam issued the following statement:

“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.

“The IMF team thanks the authorities for their hospitality and constructive discussions.”

The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.

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Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021

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Consumer Confidence

Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.

Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.

On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.

Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.

The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.

However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.

The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.

Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.

Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.

 

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Global Debt Rises by $27 Trillion to $226 Trillion in 2020 – IMF

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IMF - Investors King

The pandemic has led to an unprecedented increase in debt—issued by governments, nonfinancial corporations, and households the IMF estimated in the latest Fiscal Monitor report. In 2020 global debt reached $226 trillion and increased by $27 trillion, the IMF estimated Wednesday  (October 13) in Washington, DC.

High and growing levels of public and private debt are associated with risks to financial stability and public finances, said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department.

“According to preliminary estimates from the Global Debt Database, global debt by governments, households, and non-financial corporations reached $226 trillion. That represents an increase of $27 trillion relative to 2019. Both the level and the pace of increase are record highs. We know that high and rising debts increase risks to financial stability and public finances,” Gaspar said ahead of the Fiscal Monitor release.

Gaspar emphasized that countries with a high credibility fiscal framework benefit from better bond market access. They also experience lower interest rates on sovereign bonds.

“A strong message from the fiscal monitor is that fiscal credibility pays off. Countries that have credible fiscal frameworks benefit from better and cheaper access to bond markets. That’s a precious asset to have in an uncertain and difficult times like COVID 19. Fiscal credibility pays off!,” added Gaspar.

He also recognized that while the international community has provided critical support to alleviate fiscal vulnerabilities in low-income countries, still more is needed.

“In 2020, the IMF’s rapid financing and the G20 Debt Service Suspension Initiative contribute to make resources available to the countries that need it the most. But more is needed. With a general allocation of SDRs of $650 billion, liquidity has been provided, but much more could be achieved if rich countries would make part of their resources available to the developing world. By doing so, donors would be contributing to fighting the pandemic and to the achievement of sustainable and inclusive growth,” said Gaspar

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