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Power Grid Records 10 Collapses Amid Zero Backup Capacity

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Power - Investors King
  • Power Grid Records 10 Collapses Amid Zero Backup Capacity

The nation’s power grid has suffered its ninth total system collapse this year amid a lack of spinning reserve that is meant to forestall such occurrences.

This year, the national grid has so far recorded 10 collapses – nine total, while one was partial, the latest data obtained by our correspondent from the Ministry of Power, Works and Housing on Friday showed.

According to the Nigerian Electricity Regulatory Commission, a total system collapse means total blackout nationwide, while partial system collapse is a failure of a section of the grid.

The latest total collapse occurred on Tuesday, September 4, 2018, while total electricity generation stood at 2,982.60 megawatts as of 6am on that day, down from 3,276MW on September 1.

The output from the nation’s power plants rose to 3,204.80MW on Wednesday, but fell to 2.915.90MW on Thursday, according to the data from the ministry.

A total generation capacity of 3,894.2MW was unavailable as of 6am on Thursday, compared to 4,187.30MW MW on September 1.

Gas constraints and low load demand by the distribution companies left 1,538.5MW and 2,355.70MW, respectively idle.

Our correspondent gathered that the power grid would remain vulnerable without adequate spinning reserves.

Spinning reserve is the generation capacity that is online but unloaded and that can respond within 10 minutes to compensate for generation or transmission outages.

Out of the five power stations meant to provide spinning reserves, none had any actual reserve as of 6am on Thursday, with the contracted reserve put at 295MW.

The power stations are Egbin, Delta, and the three built under the National Integrated Power Project scheme, namely Olorunsogo II, Geregu II and Omotosho II.

The regulator, NERC, had in its Third Quarter 2017 report highlighted the need for adequate proactive measure (adequate spinning reserves) to prevent the system from being destabilised.

It said, “The commission is determined to provide all regulatory intervention necessary to ensure that the Transmission Company of Nigeria procures sufficient spinning reserves.

“Thus, the commission is currently evaluating the adequacy of the already procured ancillary services (e.g. spinning reserves) by the transmission company in order to make sufficient provision during the next tariff review.”

It noted that based on the provisions of the grid code, the system frequency, under normal circumstances, was expected to be between a lower limit of 49.75Hz and an upper limit of 50.25Hz, while the range from 48.75 to 49.75Hz and from 50.25Hz to 51.25 were regarded as lower and upper stress boundaries, respectively.

The commission said it was well determined to provide the necessary regulatory interventions to ensure that the system frequency was kept within the statutory limits.

It stated, “Frequency fluctuation and other harmonic distortion result in poor power quality that could damage sensitive industrial machines that are connected at high voltage level. The commission is working with the TCN to ensure that system voltage and frequencies operate within the statutory limits.

“The financial liquidity of the electricity industry remains as the most significant challenge affecting the sustainability of the power sector. The major contributors to the financial crisis in the industry are tariff deficits, high technical and commercial losses exacerbated by customer apathy arising from estimated billing and poor quality of supply in most load centres.”

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

Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars

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Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Economy

Currency Drop Spurs Discount Dilemma in Cairo’s Markets

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Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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