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FG to Stop Payment of Shortfalls to Gencos

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rural electrification
  • FG to Stop Payment of Shortfalls to Gencos

The Federal Government on Tuesday ordered power generation companies to go, find customers and sell their power directly to the identified customers instead of waiting for electricity distributors to sell the power or for payments from the government for the shortfalls in their (Gencos) revenues.

According to the government, plans are on the way for it to ultimately exit the monthly payments to Gencos to help cushion the revenue shortfalls on the books of the power generators as a result of the poor remittances from the power distributors.

The Permanent Secretary, Federal Ministry of Power, Works and Housing, Louis Edozien, who disclosed these on behalf of the Federal Government at a workshop on Eligible Customer Regulation in Abuja, also noted that the Electric Power Sector Reform Act never intended that government would continue to pay for shortfalls

In 2017, the Federal Government announced a commitment of N702bn through the Nigerian Bulk Electricity Trading company to guarantee the payment of electricity generated and supplied by power generation companies.

In his address to power sector operators at the workshop, Edozien said, “The purpose of this gathering is to give full effect to the (eligible customer) policy direction unveiled by the Minister of Power, Works and Housing, Babatunde Fashola, in 2017. With the policy, if you are a bulk consumer in the power sector and you are not satisfied with the services you are getting, you’ve been empowered under the Act to buy the power from an existing licencee and have it transmitted and delivered to you.

“It is a bit disheartening that though we are almost two years after that policy direction, not one fully licenced eligible customer is enjoying this regulation. So, I have messages for all the people here so that we can from today move forward much more expeditiously to effect what the minister intended almost two years ago.”

The permanent secretary added, “First is to the Nigerian Electricity Regulatory Commission; regulation is made for man, man is not made for regulation. Let’s take advantage of this regulation because a good regulation with no beneficiaries is a bad regulation.

“I have a message to Gencos, gone are the days where you could on your own or through your association or investors agitate about not being paid or not being able to sell your products. Since 2017, the Federal Government established a policy to pay you where you are not paid and that policy still subsists.

“But it is also not obtainable any longer for you to complain about not being able to sell your 2,000 megawatts. Go, find the customers who need it and sell it to them. That is what this regulation now authorises and empowers you to do. Don’t sit back and expect that government will perpetually be buying your power. No!”

Edozien argued that the Federal Government and the NBET were not the major consumers of electricity and as such, power generators must look for those who consume their product and sell to them.

“Government does not consume your power; the NBET is not the consumer of your power. Eligible customers are the consumers of your power, find them, (enter) contract with them. That’s the essence of this policy.

“The government, through the payment assurance programme, is paying the generation companies for shortfalls in payments through the NBET and clearly that is not what the Act intended for the industry today. And ultimately the government has to exit from this role,” he stated.

To power distribution companies, the permanent secretary challenged them to up their games in terms of services rendered.

“I have a message to Discos, the main reason you (Discos), TCN (Transmission Company of Nigeria), NERC, NBET, the FMPWH are in business is to satisfy customers. That’s the main reason of our existence. If your big customer is happy with you, there is no reason why he will want to take advantage of this service,” Edozien said.

The Chairman, NERC, James Momoh, revealed that about 44 interest groups were ready to take advantage of the eligible customer initiative.

Momoh said, “The eligible customer initiative now has over 44 interest groups that include those who have been licenced, those who have already signed on the purchase agreement, those who have already agreed to sign on the transmission use of service, the distribution use of service, those who are already on operation and the potential eligible customers. I think it is a good thing and we are ready to go.”

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.

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Economy

Nigeria Records Trade Deficit of 8.9 Trillion in Nine Months

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Commodities Exchange

The National Bureau of Statistics (NBS) released a report that showed that Nigeria recorded a trade deficit of 8.9 Trillion Naira between January and September 2021. 

A trade deficit occurs when a country’s imports exceed its exports over a period. Within the period, foreign trade was 35.09 Trillion Naira which comprised imports of 22 Trillion Naira and exports of 13.1 Trillion which led to an 8.9 Trillion trade deficit.

A breakdown of the data by quarters shows that trade stood at 9.76 Trillion Naira in the first quarter, which represented imports of 6.85 Trillion Naira and exports of 2.91 Trillion Naira, this resulted in a trade deficit of 3.94 Trillion during the period.

The data went on to show that the majority of the goods imported in the first quarter were from China (valued at 2 Trillion), the Netherlands (valued at 726.09 Billion) the United States (valued at 608.12 Billion), India (valued at 589.1 Billion), and Belgium (valued at 238.5 Billion) while the majority of exports were to India (valued at 488.1 Billion), Spain (valued at 287.2 Billion), China (190.1 Billion), the Netherlands (160.0 Billion) and France (133 Billion).

In the third quarter, Crude oil dominated exports with 78.47% of exports, this was followed by natural gas with 9.5%. Imports were mainly motor spirit with 12.91% of imports, Durum wheat with 3.87%, gas oil with 2.77%, and used vehicles with 2.27%.

A renowned economist, Pat Utomi said the country’s huge appetite for imports was because of insufficient domestic production which is driven by worsening insecurity and stringent government regulations. He went on to say that although there were interventions introduced by the Government and the Central Bank of Nigeria to reduce imports and increase exports, the initiatives are fraught with inconsistencies and corrupt practices that prevent any real impact.

He went on to say that it was scandalous that Nigeria’s top imports were food products and motor spirits as those are products the country should be exporting because Nigeria is a food-producing nation and has oil in abundance.

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Economy

World Bank Calls on Nigeria to Impose Special Taxes on Alcohol and Tobacco

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The World Bank Group has made a call to the Federal Government of Nigeria, urging the government to impose special taxes on alcohol, cigarettes and beverages that are highly sweetened in order to improve primary healthcare conditions in the country.

Shubham Chaudhuri, who is the Country Director for Nigeria in the World Bank Group, said that an improvement in healthcare in Nigeria will come by taxing the things that are “killing us.” He said that the economic rationale for the action is quite strong if lives are to be saved and a healthier Nigeria achieved.

Chaudhuri made the call on Friday, at a special National Council on Health meeting which was organized by the Federal Ministry of Health in Abuja. Chaudhuri stated that placing special taxes on tobacco, sweetened beverages and alcohol would reduce the health risks which come with their consumption and expand the fiscal space for universal health coverage after COVID 19.

The country director also said that investing in stronger health systems for all would make significant contributions to the fight against inequality and the rising poverty situation in the country. He went on to add that increasing health tax would provide an extra advantage of reducing healthcare cost in the future, by hindering the growth of the diseases which are caused by tobacco, alcohol and sugar-sweetened beverages.

The representative of the WHO in Nigeria, Dr Walter Mulombo said that he could confirm the large health needs of Nigerians, as well as the efforts being made to meet those needs. He said this was based on the fact that he had been to over half of Nigeria’s states in less than two years of being in the country.

Mulombo then noted that although the coronavirus exposed weaknesses in the global economy (not excluding health), it could be considered as a unique opportunity for a thorough examination of existing resources and mechanisms to prepare for a more resilient future.

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Economy

Nigeria’s VAT Revenue Falls to N500 Billion in Q3 2021, Manufacturing Sector in the Lead

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Value added tax - Investors King

In the third quarter of 2021, Nigeria generated a total sum of N500.49 billion as value-added tax which represents a 2.3% decline when compared to the N512.25 billion recorded in the second quarter of the year.

This is as seen in the VAT report which was recently released by the National Bureau of Statistics (NBS). The report revealed that the manufacturing sector was in the lead as it remitted a total of N91.2 billion, representing about 30% of the total local non-import value added taxes in that period.

In spite of the quarter-on-quarter decline of VAT collections in the reviewed period, it grew by a further 17.8% when compared to N424.7 billion generated in the same period of the previous year. The report also shows that an amount of N1.5 trillion has been generated from value added taxes from January 2021 to September 2021.

That is 40.2% higher than the N1.08 trillion recorded in the same period of 2020, and 72.3% higher than what was recorded in the same period of 2019.

To break it down, the Value Added Tax collected in the first, second and third quarter of 2021 was recorded at N496.39 billion, N512.25 billion and N500.49 billion respectively. It is higher than the corresponding figures of 2020, which sat at N324.58 billion, N327.20 billion and N424.71 billion for the first, second and third quarters respectively.

In the third quarter of 2021, the Manufacturing activity accounted for the largest share of total revenue collected across sectors, with a huge 30.87% (N91.2 billion) coming from that sector. The Information & Communication sector came in second with 20.05% (N53.9 billion) contributed, while the Mining & Quarrying sector came in third with 9.62% (N28.4 billion).

Nigeria has continued to ramp up its efforts to increase revenue from non-oil sectors by increasing its tax collection rates, which has recorded largely significant growth since the federal government increased the VAT rate from 5% to 7.5% in the 2019 Finance Act, which was signed and made effective in 2020.

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