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Power Regulator Worries Over Discos’ Poor Remittance

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  • Power Regulator Worries Over Discos’ Poor Remittance

The poor remittance by electricity distribution companies to the Nigerian Bulk Electricity Trading Plc for the energy sold to them has become a serious concern for the regulator of the power sector.

The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells to the Discos, which then supply to the consumers.

The Nigerian Electricity Regulatory Commission, in its report for the second quarter 2018, noted that the liquidity challenge in the Nigerian electricity supply industry continued to manifest during the period under review.

It said this was evidenced in the Discos’ level of remittances to NBET and the market operator, as compared with the invoices received for energy purchased from NBET and those received for administrative services from the MO.

According to the report, during the second quarter, the Discos were issued a total invoice of N161.4bn for energy received from NBET and for the administrative services by the MO, but only a sum of N53.7bn of the invoice was settled, creating a total deficit of N107.7bn.

It said a comparative analysis of market performance by the Discos in the second quarter indicated an overall settlement rate of only 30 per cent of the market invoice.

As stated in the Q1 2018 report, none of the Discos exceeded a threshold settlement of 50 per cent of its market invoices in the second quarter.

NERC said, “Jos recorded the worst remittance performance of 10 per cent and the commission is currently reviewing the viability of the Disco as a going concern.

“The challenge of poor remittance remained a serious concern to the commission as it is one of the main causes of the liquidity crisis facing the Nigerian electricity supply industry. Low remittance adversely affects the ability of NBET to honour its obligations to Gencos while service providers (the system operator, MO, NBET and NERC) struggle with paucity of funds, impacting their capacity to perform their statutory obligations.”

According to the regulator, Eko Disco recorded the highest remittance efficiency of 45 per cent in the first quarter of the year while Ikeja Disco marginally surpassed the remittance performance in the second quarter of 2018 at 46 per cent.

It said Jos and Kano Discos had the lowest remittance performance of 10 per cent and 18 per cent respectively in the second quarter despite the marginal improvement of three per cent and one per cent over the preceding quarter.

“The commission notes that tariff deficit is partly responsible for poor remittance in the industry but all the Discos are being steered to rapidly improve on their revenue collection from customers in order to fulfill their remittance obligations and mitigate the financial distress in the industry,” NERC added.

To address the poor remittance by Discos, the commission said it had commenced enforcement actions against Discos found to have engaged in unacceptably low remittances to NBET and the MO, factoring in all the parameters embedded in the tariff model.

It stated, “In this regard, the commission is working on a framework which ensures transparency and equity in the disbursement of market funds for the benefit of all market participants in the industry.”

The report said the collection efficiency of the Discos increased from 62 per cent to 64 per cent in the second quarter when compared with the preceding quarter and overall remittance to NBET increased by three per cent to 32 per cent of the total energy invoice.

The market operator received 43 per cent of the invoice payable to service providers during the same period.

The regulator said, “The total market (NBET’s and MO’s) invoices issued to international customers, comprising Communaute Electrique du Benin and Societe Nigerienne d’electricite and Ajaokuta Steel Company Limited (classified as special customer), during the second quarter of 2018 increased to N13.3bn from the N12.2bn recorded in the first quarter.

“However, no payment was received from the international and special customers during the quarter under review.”

The commission said it continued with its role of tariff reviews to adequately promote optimal performance by the Transmission Company of Nigeria and Discos and significantly enhance the quality of service to customers.

It added, “Financial illiquidity remains one of the most significant challenges threatening the sustainability of the power industry. The liquidity challenge is partly attributed to the non-implementation of cost-reflective tariffs, high technical and commercial losses exacerbated by energy theft, and consumers’ apathy to payments under the widely prevailing practice of estimated billing.”

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

Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021

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Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.

The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.

Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.

This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.

Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.

That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.

Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.

If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.

“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.

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Economy

UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?

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UK EConomy contracts

Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.

Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.

“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.

“He is raising taxes under the radar.

“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”

Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”

Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.

Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.

“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses.  This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”

He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”

The deVere CEO concludes: “The Chancellor had to perform a tough juggling act.  But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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