Connect with us

Economy

Liquidity Crisis/Inadequate Tariffs

Published

on

nuclear power
  • Liquidity Crisis/Inadequate Tariffs

A key function of the Nigerian Electricity Regulatory Commission (NERC) as contained in section 32(d) of the Electricity Power Sector Reform (EPSR) Act 2005, is to ensure that the prices charged by licensees are fair to customers and sufficient to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation.

It was in pursuant of this mandate that the authority vested in NERC that the commission established a methodology for regulating electricity prices called the Multi-Year Tariff Order.

The MYTO provides a 15-year tariff path for the Nigerian Electricity Industry with minor reviews each year to reflect changes in a limited number of parameters, such as inflation and gas prices.

The MYTO made provision for major reviews every five years, when all inputs are reviewed with stakeholders.

The current MYTO, the first, came into effect November 2013.
It is a common knowledge that in this first five years under the MYTO, NERC has not implemented the cost reflective tariff as envisaged under the arrangement.

“it is unfortunate that five years is coming to a close with NERC yet to implement the key clauses of the five years performance agreement the federal government signed with the DISCOs,” an official of a Disco said.

The three key areas which have been ignored by the federal government are the cost-reflective tariff regime, a clean debt-free book which Discos were supposed to have inherited in 2013 and the N100 billion annual subventions for two years to bridge the gap between what consumers pay and the actual cost of electricity.

Up till this time, the Discos are still being forced to sell their product at an average retail price of N32 per kilowatt hour, for a product that should sell for more than an average retail price of N80 per kilowatt hour.

While the federal government has forced the Discos to sell power below the market price, some Discos have resorted to sell at black market price, far higher than the market price, in the form of estimated billing.

The implication of this gross underfunding and other fall-outs such as interest charges, electricity marketing stabilisation fund, and historical debts such that as at now the total shortfall in the sector is to the tune of N1.35 trillion and still growing.

The current situation is unsustainable and as the first five-year agreement lapses this year, the government needs to come in decisively through NERC by resetting the market and starting afresh.

It is obvious that the government has not fulfilled its own side of the bargain, and this has made the other members of the value chain to fail in their obligations.

So, it is futile and of no use resorting to blame game.

“The only way the distribution end of the value chain can work as envisaged, and by extension, ensure that all other members of the value chain operate effectively and efficiently is for the government to start afresh with the Discos, clean the debt books and commence the implementation of the cost reflective tariff as enunciated in the MYTO,” said an official of the Transmission Company of Nigeria (TCN, who spoke to journalists in Lagos.

The way out and solution to the power sector underfunding and the Discos’ current handicap, according to the official who pleaded for anonymity is the immediate commencement of the implementation of the Power Sector Recovery Programme (PSRP) as this is the only panacea to tackling the crisis in the power sector.

The PSRP envisions that the market shortfall will be addressed through an annual federal government budget that will include provisions for fully funding historical and future sector deficit from 2017 to 2021; as well as through the establishment of cost reflective tariffs across the board over the next five years and sooner a bilateral willing buyer/willing seller for premium customers;

The market shortfall can also be addressed through the payment assurance facility to be established by the Central Bank of Nigeria (CBN), to support NBET, and other such funding initiatives by the World Bank Group on the one hand, and IFC and MIGA, on the other, up to $2.5billion and $2.7billion respectively.

From all indications, it is not in doubt that the 11 electricity distribution companies that invested about N11 trillion to buy the Power Holding Company of Nigeria, (PHCN), distribution assets in 2013 are today in deep crisis owing to acute shortage of funds to invest in infrastructure and expand their operation. Providing prepaid meters for millions of customers has become a big challenge and the entire value chain is crippled by poor funding.

Energy experts have suggested that the way forward is to reset the market through cost reflective tariff and not bringing in new investors.

“Contemplating bringing in new set of investors now is a wrong-headed approach. In any case, no investor will be willing to commit funds to a business where he cannot charge a cost reflective pricing. The problem is not with the DISCOs investors per se, even though one is suggesting that they are saints.

“The problem, however, is with the government and its refusal to live up to its billings. Let the government start afresh, inject funds, allow cost reflective tariff and play by the rules, you will see how investors will be competing to have a foothold in the sector within the first year. It is the only way to go,” said an investment analyst.

Indeed, as the five-year Performance Agreement which the 11 Discos signed with the federal government lapses, November this year, it has become imperative for the federal government to reset the market and commence a new set of Agreements with the investors, if the nation is desirous of a stable and efficient power sector.

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

FIRS Sets N5.9 Trillion Revenue Target for 2021

Published

on

firs

FIRS to Generate N5.9 Trillion Revenue  in 2021

Mohammed Nami, the Chairman of Federal Inland Revenue Service, FIRS, on Friday said the agency is projecting total revenue of N5.9 trillion for the 2021 fiscal year.

Nami stated this while meeting with the House of Representatives Committee on Finance led by Hon. James Falake on the Service’s 2021 budget defence of its proposed Revenue and Expenditure Estimates.

According to the Chairman, N4.26 trillion and N1.64 trillion were expected to come from non-oil and oil components, respectively.

However, Nami put the cost of collecting the projected revenue at N289.25 billion or 7 percent of the proposed total revenue for the year, higher than the N180.76 billion spent in 2020 to fund the three operational expenditure heads for the year.

He said: “Out of the proposed expenditure of N289.25 billion across the three expenditure heads, the sum of N147.08 billion and N94.97 billion are to be expended on Personnel and Overhead Costs against 2020 budgeted sum of N97.36 billion and N43.64 billion respectively. Also, the sum of N47.19 billion is estimated to be expended on capital items against the budgeted sum of N27.80 billion in 2020. The sum is to cater for on-going and new projects for effective revenue drive.

Speaking on while the agency failed to meet its 2020 target, Nami said “There’s lockdown effect on businesses, implementation directive also for us to study, research best practices on tax administration which involves travelling to overseas and we also have to expand offices and create offices more at rural areas to get closer to the taxpayers, we pay rent for those offices and this could be the reason why all these things went up.

“And if you have more staff surely, their salary will go up, taxes that you’re going to pay on their behalf will go up, the National Housing Fund contribution, PENCOM contribution will go up. Those promoted you have to implement a new salary regime for them. There’s also the issue of inflation and exchange rate differential”, he said.

 

Continue Reading

Economy

Gov Emmanuel Attracts $1.4b Fertilizer Plant to Akwa Ibom

Published

on

governor-udom-emmanuel

The Governor of Akwa Ibom State, Mr. Udom Emmanuel has signed an agreement for the citing of a multi billion fertilizer plant in his State.

Governor Emmanuel was part of a Nigerian delegation led by the Minister of State for Petroleum Resources, Chief Timipre Sylva, that visited Morocco to set out the next steps of the $1.4 Bln fertilizer production plant project launched in June 2018.

The agreement between the OCP Africa, the Nigerian Sovereign Investment Authority and the Akwa Ibom State Government will birth one of the biggest investments in the fertilizer production industry worldwide.

The signing ceremony took place at the Mohammed VI Polytechnic University (UMP6).

Mr. Emmanuel signed one of the agreements of the partnership, which covers a memorandum of understanding between OCP Africa, the Akwa Ibom State in Nigeria and the NSIA on land acquisition, administrative facilitation, and common agricultural development projects in the Akwa Ibom State.

Speaking while signing the agreement, Governor Emmanuel said, “Our state is receptive to investments and we are prepared to offer the necessary support to make the project a reality.

“With a site that is suitably located to enable operational logistics and an abundance of gas resources, all that is left is for the parties to accelerate the project development process”, Mr. Udom said.

The agreement reached between the Nigerian Government and the OCP further links OCP, Mobil Producing Nigeria (MPN), the NNPC, the Gas Aggregation Company Nigeria (GACN), and the NSIA.

The two partners agreed to strengthen further their solid partnership leveraging Nigerian gas and the Moroccan phosphate.

This project will lead to a multipurpose industrial platform in Nigeria, which will use Nigerian gas and Moroccan phosphate to produce 750,000 tons of ammonia and 1 million tons of phosphate fertilizers annually by 2025.

The visit of the Nigerian delegation to Morocco takes place within the frame of the partnership sealed between OCP Group and the Nigerian Government to support and develop Nigeria’s agriculture industry.

Following the success of the first phase of Nigeria‘s Presidential Fertilizer Initiative (PFI) and the progress of the fertilizer production plant project launched in 2018 by OCP and NSIA, the Moroccan phosphates group and the Nigerian government delegation have agreed on the next steps of their joint project which is rapidly taking shape.

Several cooperation agreements were inked on Tuesday at the Mohammed VI Polytechnic University (UM6P) by OCP Africa and the Nigerian delegation. Through these deals, OCP reaffirms its unwavering support of agricultural development initiatives in Nigeria including PFI.

OCP Africa and the NSIA have agreed, inter alia, to set up a joint venture which will oversee the development of the industrial platform that will produce ammonia and fertilizers in Nigeria.

The OCP has also pledged to supply Nigerian famers with quality fertilizers adapted to the needs of their soil at competitive prices and produced locally.

Continue Reading

Economy

ICPC Says Nigeria Loses $10bn to Illicit Financial Flows 

Published

on

Naira Dollar Exchange Rate

The Independent Corrupt Practices and Other Related Offences Commission (ICPC) says Nigeria accounts for 20 per cent or 10 billion dollars (N3.8 trillion) of the estimated 50 billion dollars that Africa loses to Illicit Financial Flows (IFFs).

Chairman of ICPC, Prof. Bolaji Owasanoye, said this during a virtual meeting to review a report on IFFs in relation to tax, Mrs Azuka Ogugua, spokesperson for ICPC, said in a statement released in Abuja on Friday.

The ICPC Chairman said, “the African Union Illicit Financial Flow Report estimated that Africa is losing nearly 50 billion dollars through profit shifting by multinational corporations and about 20 per cent of this figure is from Nigeria alone.”

The ICPC boss explained that taxes played “very strategic role in the nation’s political economy.”

He said the objective of the meeting was to improve on the awareness on IFFs, especially in the areas of taxation.

The ICPC boss added that the meeting would give participants the opportunity to openly discuss how to effectively use the instrumentality of taxation to curb IFFs through risk-based approach.

“Risk-based approach, that is: monitoring and audit; due process in tax collection; structured tax amnesty framework skewed in public interest; data privacy; timely resolution of audits and payment of tax refunds and intelligence sharing among revenue generating, regulatory and law enforcement agencies,” he said.

Owasanoye also stated that for the contemporary tax man to remain relevant, he must build his capacity in areas of technology management, solution architects and an astute relationship manager.

The Executive Chairman of Federal Inland Revenue Service (FIRS) Mr Muhammad Nani, expressed concerns that IFFs posed a serious threat to the Nigerian economy as the act robbed the nation of resources that were needed for development.

Nani declared that tackling IFFs would expand the country’s tax base and improve revenue generation, which was required for development.

He consequently pushed for policy reforms that would make it difficult for “capital flights” from occurring so that the country would be placed on the path of growth.

Other discussants at the event identified weak regulatory framework, opacity of financial system and lack of capacity amongst others as some of the factors that fuelled IFFs.

The discussants emphasised the need for capacity building of relevant stakeholders as one of the ways to stamp out illicit financial flows.

They commended ICPC for leveraging its corruption prevention mandate to open a new vista in IFFs discourse in Nigeria. (NAN)

Continue Reading

Trending