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FG to Stop Payment of Shortfalls to Gencos

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  • 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.”

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.

Economy

South Africa’s Inflation Rate Holds Steady in May

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South Africa's economy - Investors King

South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Economy

Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024

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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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Economy

World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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