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Some Power Firm Managers Award Inflated Contracts to Relatives –Fashola

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Electricity - Investors King
  • Some Power Firm Managers Award Inflated Contracts to Relatives –Fashola

The Minister of Power, Works and Housing, Mr. Babtunde Fashola, on Monday alleged that the managers of some power distriubtion firms were awarding inflated contracts to their relatives.

He also threatened to sanction the firms for their continued inability to deliver on agreed terms.

While condemning the recent statements by the firms, a visibly angry Fashola declared that the power firms had failed in many aspects.

According to him, allegations of obsolete infrastructure in the power sector by the companies are unnecessary because they were aware of the state of the facilities when they purchased the assets.

The minister, who spoke during the 15th monthly meeting of power sector stakeholders in Jos, Plateau State, also demanded that participants should cast a vote on whether to carry on with the meeting every month or to put an end to it, as he expressed worry over the poor attendance at the forum.

Fashola was particularly pained by the actions of the power distribution companies, who according to him, are bent on frustrating the stakeholders’ meetings, adding that the Discos had failed in providing meters and electricity feeders, as well as remitting very poor revenue to the market and making false allegations against the government, among others.

The minister, who chaired the meeting, also lamented the electrocution of seven persons at a football viewing centre in Calabar, Cross River State recently, and blamed it on man-made errors of the power companies.

“Whilst the accident is regrettable and the consequences very saddening, they were clearly man-made and avoidable; and if we must learn any lessons from the accident, it is to honestly and truthfully admit that it occurred as a result of non-compliance with laws and regulations,” he said.

On how the Discos frustrate efforts of the government, Fashola said the firms had formed themselves into an association of power distribution companies and had persistently issued statements on issues they either did not present for discussion at meetings, or which contradicted the communiqué jointly agreed and released after each meeting.

The minister, however, declared that his ministry reserved the right to recognise or deal with the Discos as a body, adding that the Nigerian Electricity Regulatory Commission and the Nigerian Bulk Electricity Trading Plc would communicate a similar position to the firms.

Picking on the issues raised by the Discos in their statements, Fashola said the firms alleged that attempts to escrow their revenue accounts would amount to nationalisation or an intrusion into their business, but failed to state that the condition was agreed by the firms with Central Bank of Nigeria.

He stated that the agreement between the Discos and the CBN was a condition for the bank to offer the firms stabilisation funds by way of loans to fund the business they invested in because commercial banks were reluctant to do so.

Fashola said, “What you (Discos) also failed to state was that the loan was at 10 per cent interest, which is well below the commercial rate. What you also failed to state is that you also agreed under that arrangement to establish letters of credit to guarantee future payments to the NBET and Transmission Company of Nigeria’s Market Operator, that the agreed commercial terms of the letters of credit authorises the NBET and the Market Operator to draw on the letters of credit for any default in payment to them, and that such defaults have occurred and continue to occur.

“Any right-thinking person will accept the principle that any person lending you money must have the right to know what you are doing with the money, especially when under-collection and underpayment have been a major feature of many Discos’ performance.

“As far as the regulation on your procurement is concerned, what the public needs to know, which your statement was silent on, is that you are entitled to fully recover your costs and investments by law, and this is the function of how tariffs are calculated.”

The minister said the government had 40 per cent stake in the Discos and that it had a duty to ensure that they buy parts and other equipment at reasonable and competitive market prices, and “not through inflated contracts to relatives as we have seen in some Discos in respect of which NERC will take action in due course and sanction those who are involved.”

He added that many of the firms had failed to invest in feeders and distribution equipment to get power to consumers, noting that this had led to load rejection in an economy that did not have enough electricity.

“Your statement does not address the ill-logic of standing in the way of a consumer seeking to get by himself what the service provider has failed or is unable to give him,” Fashola said.

On corporate governance at the Disco level, he stated that the power firms had failed to provide up-to-date audited financial statements as required by their licences.

The minister said, “If a company cannot produce all the records of its transactions and accounts, does that not allude to gaps in its governance? Does the fact that consumers go beyond their service provider who collects the money monthly to complain to government, who does not collect money for their power, not call for a look in the mirror about your corporate governance?

“Good corporate governance will ignite the conscience of an electricity business to first provide meters to its customers before seeking tariff increase, so that a metered consumer will at least have the ability to fairly measure from his meter how he is being billed.”

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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Economy

World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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Economy

Nigeria’s Food Inflation Hits 40.66% Year-on-Year in May 2024

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Nigeria's Inflation Rate - Investors King

Nigeria’s food inflation rate surged to 40.66% on a year-on-year basis in May 2024, a significant increase from 24.82% recorded in May 2023.

The latest figures from the National Bureau of Statistics (NBS) highlight the rising cost of essential food items, exacerbating the economic challenges faced by many Nigerians.

The NBS report attributes the steep rise in food inflation to substantial price increases in several staple items.

Notably, the prices of Semovita, Oatflake, Yam flour, Garri, and Beans saw considerable hikes.

In addition, the cost of Irish Potatoes, Yams, Water Yam, Palm Oil, and Vegetable Oil also climbed significantly. Within the protein category, Stockfish, Mudfish, Crayfish, Beef, Chicken, Pork, and Bush Meat experienced notable price jumps.

The month-on-month food inflation rate in May 2024 was 2.28%, reflecting a slight decrease of 0.22 percentage points from the 2.50% recorded in April 2024.

This month-to-month decline was due to a slower rate of price increases for Palm Oil, Groundnut Oil, Yam, Irish Potatoes, Cassava Tuber, Wine, Bournvita, Milo, and Nescafe.

Despite the minor monthly decrease, the average annual food inflation rate for the twelve months ending May 2024 was 34.06%.

This marks a significant rise of 10.41 percentage points from the average annual rate of 23.65% recorded in May 2023.

The sharp rise in food inflation is raising concerns among economic analysts and policymakers, as it significantly impacts the cost of living for Nigerians.

The rising food prices are straining household budgets and contributing to an overall inflation rate that threatens economic stability.

In response to the inflationary pressures, the Nigerian government and relevant stakeholders are being urged to implement effective measures to stabilize food prices and address the underlying causes of inflation.

Efforts to boost agricultural productivity, improve supply chains, and tackle market inefficiencies are seen as critical to mitigating the inflationary trend.

The NBS report underscores the urgent need for comprehensive strategies to manage inflation and ensure food security for the population.

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Economy

Nigeria’s Inflation Rate Climbs to 33.95% in May, NBS Reports

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consumers

The National Bureau of Statistics (NBS) has revealed that Nigeria’s headline inflation rate rose to 33.95% in May 2024, a slight increase from the 33.69% recorded in April.

This 0.26 percentage point rise underscores the ongoing economic challenges the country faces as it continues to grapple with rising prices and economic instability.

The report highlights that on a year-on-year basis, the headline inflation rate increased by 11.54 percentage points compared to May 2023, when the rate was 22.41%. This significant annual increase indicates a persistent upward trend in the cost of living for Nigerians over the past year.

However, the month-on-month analysis presents a mixed picture. The headline inflation rate for May 2024 was 2.14%, slightly lower than the 2.29% recorded in April 2024. This 0.15 percentage point decrease suggests a marginal slowdown in the rate at which prices are rising month by month.

Urban vs. Rural Inflation Rates

The NBS report also provides detailed insights into urban and rural inflation dynamics. In urban areas, the inflation rate in May 2024 stood at 36.34% on a year-on-year basis, a substantial 12.61 percentage points higher than the 23.74% recorded in May 2023.

On a month-on-month basis, urban inflation was 2.35%, down by 0.32 percentage points from April 2024’s rate of 2.67%.

Conversely, the rural inflation rate for May 2024 was 31.82% year-on-year, which is 10.63 percentage points higher than the 21.19% recorded in May 2023.

Month-on-month, rural inflation slightly increased to 1.94% from 1.92% in April 2024, indicating a steady rise in prices in rural regions.

Implications and Responses

The continuous rise in inflation, particularly in urban areas, poses significant challenges for the Nigerian economy.

The increase in prices for essential goods and services such as food, transportation, and housing is putting immense pressure on household budgets and the overall standard of living.

Economic analysts suggest that the persistent inflationary pressures are driven by several factors, including supply chain disruptions, increased production costs, and fluctuating exchange rates. The impact of these factors is felt more acutely in urban areas, where the cost of living is inherently higher.

In response to these inflationary trends, policymakers are under pressure to implement measures that can stabilize prices and ease the financial burden on citizens.

Strategies such as tightening monetary policy, increasing food production, and improving supply chain efficiency are being considered to curb the rising inflation.

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