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Economy

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.”

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.

Economy

Fitch Agency Revises Nigeria’s Growth Projection for 2021

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Fitch Ratings

Fitch Agency Revises Nigeria’s Growth Projection for 2021

Fitch Ratings, one of the world’s leading agencies, has revised down Nigeria’s growth projection for 2021.

The global rating agency predicted that Nigeria will grow by 1.5 percent in 2021, down from the previous 2.3 percent projection.

Fitch based its latest prediction on weaker base effects coming out of a shallower contraction recorded by the country in 2020.

While the agency said oil exports would be the main growth driver for Nigeria in 2021, consumer spending and investment were expected to remain subdued because of the rising inflation and the slow distribution of the COVID-19 vaccine.

Fitch Ratings, however, said Africa’s largest economy could expand by 2.7 percent in 2022, adding that by then it “expect Nigeria’s vaccination programme to gather pace, which will result in private consumption and fixed investment accelerating.”

“We at Fitch Solutions have revised our estimate for Nigeria’s real Gross Domestic Product (GDP) to a contraction of 1.9 per cent in 2020, compared to our previous estimate of a 3.2 per cent fall. The revision follows the release of stronger than expected GDP data indicating that the economy exited recession in the fourth quarter of 2020, growing by 0.1 per cent year-on-year, after contracting by 3.6 per cent in the third quarter of 2020 and by 6.1 per cent in the second quarter of 2020.

“The agriculture and services sectors led the Q4 2020 rebound, expanding by 3.4 per cent and 1.3 per cent respectively, resulting in non-oil growth rising by 1.7 per cent compared to a 2.5 per cent fall in Q3 2020. The oil sector (around 8.0% of GDP) contracted by 19.8 per cent in Q4 2020 – its third consecutive quarterly contraction – because of falling oil production and weak prices.

“Crude production slowed to 1.56 million barrels per day (b/d) in Q4 2020 from 1.67 milion b/d in Q3 2020, partly because of Nigeria’s commitments under the OPEC+ deal, while the price of Brent fell to an average of $43.2 per barrel (/bbl) in 2020 compared to $64.2/bbl in 2019,” it stated.

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Economy

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

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Farm input

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

The Nigerian Institute of Animal Science on Tuesday called on the Federal Government to halt the continued export of maize and soybean to reduce the scarcity of the commodities as well curb their price hike in Nigeria.

Registrar and Chief Executive Officer, NIAL, Prof. Eustance Iyayi, told journalists in Abuja that the poultry sector was currently hit by the severe scarcity of maize and soybean.

This, he said, was due to the continued export of the commodities, the COVID-19 pandemic, which had disorganised the international supply chain, lingering insecurity in the North-East, farmers/herders conflict and flooding in some parts of the country.

“Maize and soybean are being exported and this has exacerbated the situation leading to local scarcity and price escalation of the commodities in poultry production,” Iyayi stated.

He added, “The increasing prices of the essential commodities has resulted in the increase in price of finished feeds by about 75 per cent.

“This has led to the closure of small and medium sized poultry farms thereby threatening about 10 million jobs as a result of this scarcity.

“To set the poultry industry from total collapse, the institute urges the government to immediately halt the exportation of soybean and maize and grant import permit to importers at the official foreign exchange rate.”

Iyayi said there was shortage of soybean in Nigeria and other countries, stressing that the little amount being produced across the country should not be exported.

He said the current maize yield of about one to two tonnes per hectare being produced in Nigeria would not be enough to sustain the country.

The NIAL helmsman stated that the country should be producing between seven and 10 tonnes per hectare in order to meet the requirements for humans and animals.

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Economy

Petrol Landing Cost Jumps to N186, Oil Hits $64

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stakeholders

Petrol Landing Cost Jumps to N186, Oil Hits $64

Against the backdrop of the rising price of oil prices, the landing cost of Premium Motor Spirit (petrol) imported into Nigeria has increased to N186.33 per litre.

Investors King had exclusively reported on February 9 that the landing cost of PMS rose to about N180 per litre on February 5 from N158.53 per litre on January 7.

Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.

Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose to N186.33 per litre on February 16, with the pump price of the product expected to be N209.33 per litre.

The international oil benchmark, Brent crude, closed at $63.96 per barrel on February 16, up from $59.34 per barrel on February 5.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $560.75 per metric tonne (N163.08 per litre, using N390/$1) on February 16 from $543.25 per metric tonne (N157.99 per litre) on February 5.

Other cost elements that make up the landing cost include freight (N10.29), lightering expenses (N4.57), insurance cost (N0.25), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

The freight cost increased to $35.41 per MT (N10.29 per litre) last Wednesday from $30.04 per MT (N8.74 per litre) on February 5.

The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

Apart from the changes in global crude oil prices, the exchange rate of naira to the dollar also affects the cost of imported petrol.

The cost of petrol would be higher if the 410/$1 rate at which the naira closed on Monday at the Investors’ and Exporters’ Foreign Exchange Window was used. The naira closed at 480/$1 at the parallel market.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

Oil marketers said recently that they were ready to resume importation of petrol if the foreign exchange was made available to them at a competitive rate.

“The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimising the adverse effects of this action on our citizens,” the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, said at a virtual press briefing.

Brent crude, against which Nigeria’s oil is priced, rose by $1.67 to $64.58 per barrel as of 6:08pm Nigerian time on Monday.

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