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No Incentive to Increase Power Generation, Say Gencos

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  • No Incentive to Increase Power Generation, Say Gencos

As households and businesses continue to lament the nation’s electricity woes, power generation companies in the country have said there is no incentive for them to increase output from their plants.

The Gencos said their total generation capacity rose to 7,383.04 megawatts in 2018 from 4,214.32MW in 2013, when the power sector was privatised by the Federal Government.

Total power generation, which plunged to 2,938.5MW last Wednesday, rose to 4,305.5MW as of 6am on Monday, according to data from the Nigeria Electricity System Operator, an arm of the Transmission Company of Nigeria.

The system operator put the installed generation capacity at 12,910.40MW; available capacity at 7,652.60MW; transmission wheeling capacity at 8,100MW; and the peak generation ever attained at 5,375MW.

The Executive Secretary, Association of Power Generation Companies, the umbrella body for the Gencos, Dr Joy Ogaji, in a telephone interview with our correspondent, said the limitations of the transmission and distribution networks as well as a lack of payments to Gencos were a drag on increased generation.

“Consistently, from January to December 2018, we had available generation capacity of 7,000MW and above, but the system was taking a maximum of 4,000MW. So, does that incentivise any investor to increase again? There is no incentive to increase generation or to expand capacity, because as we are increasing, they are not taking it,” she said.

Ogaji said the association did an analysis of how much generation capacity was available, how much was taken and how much was stranded from 2013 to 2018.

She said, “From 2013, the power taken did not change at all. It was just hovering around 3,000MW until it rose to 4,000MW in some days, out of over 7,000MW of available generation capacity. And who pays for the difference? No one. That is why the system can just continue to reject load because nobody is paying for it; if you are paying for it, you will be compelled to take more.

“So, the Nigerian Electricity Regulatory Commission needs to stand up and make the Discos take as much as is available because that is why the Gencos signed their performance agreements.”

In early February, the Group Managing Director, Sahara Power Group, Mr Kola Adesina, said work was on-going to make the installed capacity of Egbin Power Plc, the nation’s biggest power station, available to consumers at the end of the month.

Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group.

“We are striving towards ensuring that at the end of this month, Egbin’s installed 1,320MW will be available to Nigerians. However, two restrictions we usually would have are lack of gas supply and transmission evacuation. So, if those two constraints are there, it is going to be impossible for us to deploy the 1,320MW,” Adesina had said.

Government-owned Nigeria Bulk Electricity Trading Plc buys electricity in bulk from Gencos through Power Purchase Agreements and sells to the distribution companies, which then supply it to the consumers.

The Federal Government, in March 2017, approved N701bn payment assurance guarantee by the Central Bank of Nigeria to help Gencos meet gas payment obligation starting from January 2017 to December 2018.

“The guarantee has ended. Up till now there is no plan for payment to Gencos, apart from the 26 per cent the Discos are paying. Gas suppliers are not ready to accept 26 per cent payment for the gas they sell to Gencos,” Ogaji said.

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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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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