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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

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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