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DisCos’ Revenue Shortfalls Hit N892.4b

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Electricity
  • DisCos’ Revenue Shortfalls Hit N892.4b

Electricity distribution companies (DisCos) have piled up a loss of N892.4 billion.

The Chief Executive Officer (CEO) of the Association of Nigeria Electricity Distributors (ANED), Mr Azu Obiaya, who led officials of ANED and some DisCos on courtesy visit to media house, spoke of how the build up of the shortfalls resulted in the huge amount.

He said: “The N892 billion debts is actually a buildup of a number of things. It is a buildup of the N100 billion subsidy government promised that we never saw and have not seen. It is also a buildup of two actions or activities that were a cause of political expediency, which was when the R2 class of customers was frozen. That was supposed to be frozen for six months and ended up being frozen for 18 months. It is also a product of the removal of collection losses.

“When we go beyond that to 2016, when the collection losses were taken out. When this government came to power in 2015, they began to negotiate with us and multi-year tariff order (MYTO) 2015 was a result of the negotiations.

“But two things happened, one is that in putting together MYTO 2015, Nigerian Electricity Regulatory Commission (NERC) forgot to account for January so MYTO 2015 was implemented in February, that alone added N12 billion to the generation shortfall. To pay or not to pay the MYTO recommendation, and not to upset Nigerians, NERC said we will now sculpt the tariff, which means we (DisCos) will under-recover, so N497 billion supposedly was taken out of the tariff. In other ways, the tariff was suppressed by N497 billion for the next four years under that assumption that the DisCos will go to the banks and borrow money and fill up that gap until that point when they (DisCos) begin to over-recover.

“The other thing that has happened is with the tariff. Every six months there was supposed to be a minor review which will adjust the following items, generation, inflation and foreign exchange, among other.

“Generation – the MYTO model assumes a generation of 5,000 megawatts (Mw) and reality is 3,500Mw. On inflation, MYTO assumes nine per cent and the reality of today is 15.2 per cent and on foreign exchange (forex), it assumes N198 to a dollar but the reality is N305 and 363, while inflation index is tied to the U.S. because 85 per cent of our equipment is dollar denominated. The assumption is 0.02 and our reality is 2.2.

“So you can see there is a gap, which added to the shortfall. The other part of it, which you may not be aware of, is with the roll out of MYTO 2015, we had a significant consumer push back with the National Assembly encouraging people not to pay, the regulator (NERC) incorporating into the order that says “if you are not metered in six days, don’t pay.”

“A number of citizens adopted that as a mantra as well as litigations. MAN also litigated against us and the court issued an injunction that prevailed upon MAN to continue at MYTO 2.0 not even 2.1., and here we were at MYTO 2015. All of these elements kept building up. The huge shortfall is a product of all of these things.”

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

Federal Government Set to Seal $3.8bn Brass Methanol Project Deal in May 2024

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Gas-Pipeline

The Federal Government of Nigeria is on the brink of achieving a significant milestone as it prepares to finalize the Gas Supply and Purchase Agreement (GSPA) for the $3.8 billion Brass Methanol Project.

The agreement to be signed in May 2024 marks a pivotal step in the country’s journey toward industrialization and self-sufficiency in methanol production.

The Brass Methanol Project, located in Bayelsa State, is a flagship industrial endeavor aimed at harnessing Nigeria’s abundant natural gas resources to produce methanol, a vital chemical used in various industrial processes.

With Nigeria currently reliant on imported methanol, this project holds immense promise for reducing dependency on foreign supplies and stimulating economic growth.

Upon completion, the Brass Methanol Project is expected to have a daily production capacity of 10,000 tonnes of methanol, positioning Nigeria as a major player in the global methanol market.

Furthermore, the project is projected to create up to 15,000 jobs during its construction phase, providing a significant boost to employment opportunities in the country.

The successful execution of the GSPA is essential to ensuring uninterrupted gas supply to the Brass Methanol Project.

Key stakeholders, including the Nigerian National Petroleum Company Limited and the Nigerian Content Development & Monitoring Board, are working closely to finalize the agreement and pave the way for the project’s advancement.

Speaking on the significance of the project, Minister of State Petroleum Resources (Gas), Ekperikpe Ekpo, emphasized President Bola Tinubu’s keen interest in expediting the Brass Methanol Project.

Ekpo reaffirmed the government’s commitment to facilitating the project’s success and harnessing its potential to attract foreign direct investment and drive economic development.

The Brass Methanol Project represents a major stride toward achieving Nigeria’s industrialization goals and unlocking the full potential of its natural resources.

As the country prepares to seal the deal in May 2024, anticipation grows for the transformative impact that this landmark project will have on Nigeria’s economy and industrial landscape.

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Economy

IMF Report: Nigeria’s Inflation to Dip to 26.3% in 2024, Growth Expected at 3.3%

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IMF global - Investors King

Nigeria’s economic outlook for 2024 appears cautiously optimistic with projections indicating a potential decrease in the country’s inflation rate alongside moderate economic growth.

The IMF’s revised Global Economic Outlook for 2024 highlights key forecasts for Nigeria’s economic landscape and gave insights into both inflationary trends and GDP expansion.

According to the IMF report, Nigeria’s inflation rate is projected to decline to 26.3% by the end of 2024.

This projection aligns with expectations of a gradual easing of inflationary pressures within the country, although challenges such as fuel subsidy removal and exchange rate fluctuations continue to pose significant hurdles to price stability.

In tandem with the inflation forecast, the IMF also predicts a modest economic growth rate of 3.3% for Nigeria in 2024.

This growth projection reflects a cautious optimism regarding the country’s economic recovery and resilience in the face of various internal and external challenges.

Despite the ongoing efforts to stabilize the foreign exchange market and address macroeconomic imbalances, the IMF underscores the need for continued policy reforms and prudent fiscal management to sustain growth momentum.

The IMF report provides valuable insights into Nigeria’s economic trajectory, offering policymakers, investors, and stakeholders a comprehensive understanding of the country’s macroeconomic dynamics.

While the projected decline in inflation and modest growth outlook offer reasons for cautious optimism, it remains essential for Nigerian authorities to remain vigilant and proactive in addressing underlying structural vulnerabilities and promoting inclusive economic development.

As the country navigates through a challenging economic landscape, concerted efforts towards policy coordination, investment promotion, and structural reforms will be crucial in unlocking Nigeria’s full growth potential and fostering long-term prosperity.

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Economy

South Africa’s March Inflation Hits Two-Month Low Amid Economic Uncertainty

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South Africa's economy - Investors King

South Africa’s inflation rate declined to a two-month low, according to data released by Statistics South Africa.

Consumer prices rose by 5.3% year-on-year, down from 5.6% in February. While this decline may initially suggest a positive trend, analysts caution against premature optimism due to various economic factors at play.

The weakening of the South African rand against the dollar, coupled with drought conditions affecting staple crops like white corn and geopolitical tensions in the Middle East leading to rising oil prices, poses significant challenges.

These factors are expected to keep inflation relatively high and stubborn in the coming months, making policymakers hesitant to adjust borrowing costs.

Lesetja Kganyago, Governor of the South African Reserve Bank, reiterated the bank’s cautious stance on inflation pressures.

Despite the recent easing, inflation has consistently remained above the midpoint of the central bank’s target range of 3-6% since May 2021. Consequently, the bank has maintained the benchmark interest rate at 8.25% for nearly a year, aiming to anchor inflation expectations.

While some traders speculate on potential interest rate hikes, forward-rate agreements indicate a low likelihood of such a move at the upcoming monetary policy committee meeting.

The yield on 10-year bonds also saw a marginal decline following the release of the inflation data.

March’s inflation decline was mainly attributed to lower prices in miscellaneous goods and services, education, health, and housing and utilities.

However, core inflation, which excludes volatile food and energy costs, remained relatively steady at 4.9%.

Overall, South Africa’s inflation trajectory underscores the delicate balance between economic recovery and inflation containment amid ongoing global uncertainties.

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