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Nigeria’s Power Sector Losses Growing at N474bn Annually — AFD



  • Nigeria’s Power Sector Losses Growing at N474bn Annually — AFD

The financial losses in Nigeria’s power sector is growing by at least N474bn annually, a study conducted by the French Agency for Development has revealed.

In the recent study, which was developed by the AFD with support from the European Union and entitled ‘Nigeria Electricity Supply Industry’s Challenges and a Way Forward,’ the agency also noted that the existing power generation assets across the country were inefficient.

The AFD report, which was obtained by our correspondent in Abuja on Friday after it was released on May 20, 2019, by the French agency, stated, “The situation at NESI (Nigeria Electricity Supply Industry) is so deteriorated that the revenue collection is not even enough to pay the generation cost.

“The industry losses is growing at a rate of at least N474bn per year or N1.3bn per day, but not even including the financial costs of this chaos. Consequently, this liquidity crisis has put the system on the verge of collapsing, which is not able to increase its generation capacity, remove its infrastructure constraints at transmission and distribution networks and aggressively reduce its ATC&C (Average Technical, Commercial and Collection) losses.”

The agency stated that a large share of the industry’s revenue requirement ends on the side of the fossil fuel vendors due to the sector’s own inefficiencies.

“Historically, end consumers only receive a few hours of power supply per day which does not cover their need and consequently, for those that can afford it, they are run in their captive generators for producing electricity to cover their needs. It is not even clear which are the revenues of the generator sets and fossil fuel sellers that are off taking from the power supply industry,” the report stated.

It said the power sector was facing storm and had entered into a spiral, which had not allowed it to improve its performance and where the liquidity crisis had become a serious risk for Nigeria.

It outlined the concerns in the sector which formed the spiral to include customer dissatisfaction, disaffection and disloyalty, historical infrastructure gap, lack of capital expenditure and operating expenditure, lack of access to finance, poor performance, distrust among all the stakeholders, weak governance and erratic regulation, lack of cost reflective tariff, tariff shortfall and market shortfall, and ramping liquidity crisis.

AFD noted that in Nigeria nowadays, only about 4,500 to 5,500 megawatts of operational capacity was available and it had been always much lower than any Multi Year Tariff Order projection.

“In general, the existing power generation assets are inefficient. More than 50 per cent of the generation capacity is not available, either for technical reasons/planned maintenance or due to unavailability of gas or other unplanned outage reasons,” the report stated.

On the basic principle for any power system, the French agency stated that under normal conditions, the cost of the service or revenue requirement should be equal to the revenues collected from the end customers.

It said when this basic principle is not met, the system becomes unbalanced, liquidity crisis arises and tension between the different stakeholders would begin without resulting in a benefit for the end customer.

The report explained how the country’s power sector works. It stated that the electricity value chain was a regulated model for generation, transmission and distribution and was designed to be linked back to back by contracts, which mirror each other to ensure industry liquidity and sustainability.

On how the revenue requirements were set in the industry, it said the sector was being regulated by the Multi Year Tariff Order that was designed to recover the cost of the service for the whole value chain.

“This is done every certain number of years with best practices of two, three and up to five years, although in Nigeria is every 10 years, providing scope for adjustments in the case of key cost changes or fundamental variables, e.g. inflation, fuel cost, forex and energy wheeled, through major and minor reviews and/or any specific tariff review required by the distribution companies,” the report stated.

The AFD observed that historically, the demand for power in Nigeria had always been much higher than the available capacity across the country.

It stated that the power demand forecast was uncertain, although the Nigerian (power) System Operator estimated it to be almost 26 gigawatts, which was six times more than the capacity distributed and three times more that the available generation capacity.

The report, however, stated that going forward, the country’s power system master plan defines a generation forecast scenario of 10GW in 2020, 15GW in 2025, 23GW in 2030 and 28GW in 2035, which would require a massive generation investment of more than $20bn in the next 20 years.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Global Markets Near Record Peaks and Will Get Stronger: deVere CEO




As the FTSE 100 hits 7,000 points for the first time since the Covid pandemic, global stock markets are poised to “get even stronger”, says the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The observation from Nigel Green, the chief executive and founder of deVere Group, comes as London’s index jumped over the important threshold in early trading in London, gaining over 0.5% to 7024 points.

Mr Green notes: “London’s blue-chip index is up 40% since the worst lows of the pandemic.

“This landmark moment represents the wider optimistic sentiment gripping global markets which are near record peaks.

“We can expect global stock markets to get even stronger as investors look to seize the opportunities from economies reopening.

“They are looking towards economies rebounding in a post-pandemic era due to the monetary and fiscal stimulus, pent-up cash and demand, and strong corporate earnings.

“The current ultra-low interest rate environment and the under-performance of bonds will also act as a catalyst for stock markets.”

However, the CEO’s bullish comments also come with a warning.

“I would urge investors to proceed with caution as there are some headwinds on the horizon, including relations between the U.S. and China, the world’s two largest economies, which could be coming to a tipping point in coming weeks.

“As such, in order to capitalise on the opportunities and mitigate risks, investors must ensure proper portfolio diversification.”

Mr Green concludes: “A variety of factors are going to drive global stock markets. Investors will not want to miss out and should work with a good fund manager to judiciously top-up their portfolios.”

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Refinitiv Expands Economic Data Coverage Across Africa



Building on its commitment to drive positive change through its data and insights, Refinitiv today announced the expansion of its economic data coverage of Africa. The new data set allows investment managers, central bankers, economists, and research teams to use Refinitiv Datasteam analytical data for detailed exploration of economic relationships and investment opportunities among data series covering the African continent.

Securing reliable, detailed, timely, locally sourced content has not been easy for economists who have in the past had to use international sources which often can take many months to update and opportunities to monitor the market can be missed. Because Africa is a diverse continent, economists and strategists need more timely access to country-specific data via national sources to create tailored business, policy, trading and investment strategies to meet specific goals.

Africa continues to develop critical infrastructure, telecommunications, digital technology and access to financial services for its 1.3bn people. The World Bank estimates that over 50% of African inhabitants will be under 25 by 2050. This presents substantial opportunities for investors who can spot important trends and make informed decisions based on robust and timely economic data.

Stuart Brown, Group Head of Enterprise Data Solutions, Refinitiv, said: “Africa’s growing, dynamic and fast evolving economies makes it a focal point for financial markets today and in the coming decades.  As part of LSEG’s commitment to empowering the global markets with accurate and timely data, we are excited about making these unique datasets available via the Refinitiv Data Platform. Our economic data coverage of Africa will provide our customers with deeper and broader inputs for macroeconomic analyses and enable more effective investment strategies and economic research.”

Refinitiv Africa economic data coverage:

  • Africa economics content comprises around 500,000 nationally sourced time series data covering 54 African nations
  • Content is sourced from national statistical offices, central banks and other key national institutions
  • The full breadth of economics categories in Datastream including national accounts, money and finance, prices, surveys, labor market, consumer, industry, government and external sectors
  • International sources including OECD, World Bank, IMF, African Development Bank, Oxford Economics & more provide comparable data & forecasts across the continent

Refinitiv® Datastream® has global macroeconomics coverage to analyze virtually any macro environment, and better understand economic cycles to uncover trends and forecast market conditions. With over 14.2 million economic times series map trends, customers can validate ideas and identify opportunities using Refinitiv Datastream. Access its powerful charting tools, 9,000 pre-built chart templates and chart studies for commonly used valuation, performance, and technical and fundamental analysis.

 Refinitiv continually grows available data – the China expansion in 2019 covered a unique combination of economic and financial indicators. Refinitiv plans to expand Southeast Asia covering Thailand, Vietnam, Philippines and Malaysia with delivery expected in 2021. This ensures that Refinitiv will have much needed emerging market economic content.

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Crude Oil

Oil Rises on Drawdown in U.S. Oil Stocks, OPEC Demand Outlook



Oil 1

Oil prices rose in early trade on Wednesday, adding to overnight gains, after industry data showed U.S. oil inventories declined more than expected and OPEC raised its outlook for oil demand.

Brent crude futures rose 28 cents, or 0.4%, to $63.95 a barrel at 0057 GMT, after climbing 39 cents on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures similarly climbed 28 cents, or 0.5%, to $60.46 a barrel, adding to Tuesday’s rise of 48 cents.

Oil price gains over the past week have been underpinned by signs of a strong economic recovery in China and the United States, but have been capped by concerns over stalled vaccine rollouts worldwide and soaring COVID-19 infections in India and Brazil.

Nevertheless, the Organization of the Petroleum Exporting Countries (OPEC) tweaked up its forecast on Tuesday for world oil demand growth this year, now expecting demand to rise by 5.95 million barrels per day (bpd) in 2021, up by 70,000 bpd from its forecast last month. It is banking on the pandemic to subside and travel curbs to be eased.

“It was a welcome prognosis by the market, which had been fretting about the impact the ongoing pandemic was having on demand,” ANZ Research analysts said in a note.

Further supporting the market on Wednesday, sources said data from the American Petroleum Institute showed crude stocks fell by 3.6 million barrels in the week ended April 9, compared with estimates for a decline of about 2.9 million barrels from analysts polled by Reuters.

Traders are waiting to see if official inventory data from the U.S. Energy Information Administration (EIA) on Wednesday matches that view.

Market gains are being capped on concerns about increased oil production in the United States and rising supply from Iran at a time when OPEC and its allies, together called OPEC+, are set to bring on more supply from May.

“They may have to contend with rising U.S. supply,” ANZ analysts said.

EIA said this week oil output from seven major shale formations is expected to rise by 13,000 bpd in May to 7.61 million bpd.

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