The federal government has said that there’s still a lot of financing gap in the country’s power sector, requiring an immediate funding of $30 to $40 billion in the generation, transmission and distribution value chain.
The government stated that from all sources, it expects to spend between $3 billion to $5 billion to boost power supply in the sector in the next 24 months and eventually free itself from the payment of subsidies.
Speaking during a television programme on the challenges and prospects of the power sector, Special Adviser to President Muhammadu Buhari on Infrastructure, Mr. Ahmad Zakari, noted that the sector is currently bedeviled by three major classes of challenges.
He grouped the systemic challenges as regulatory, fiscal and infrastructural, explaining that for years, Nigeria had a situation where distribution companies were buying power at high prices but were only allowed to sell at low prices by the government.
But he noted that the current administration has gone a long way to correct the inefficiency by introducing the service-based tariff despite the regulatory gap which created an investment quagmire wherein any investor who put in money wasn’t able to recover it.
Zakari further stressed that the administration has worked out how it will push more infrastructure into the network, starting from the National Mass Metering Programme (NMMP), through the emergency intervention from the central bank, commercial banks and donor partners.
This, he said, was in addition to the incremental support from Siemens and other programmes, amounting to about $3 billion actively being spent and would be spent over the next 24 months.
On the issue of grid collapses, he stated that in 2015, there were 28 total or partial collapses, while as of last year there were four , noting that in 2021, Nigeria has had one partial and one total collapse.
“There’s a plan to invest in SCADA, which is the system that digitally manages the grid. It allows you to monitor all of the figures and voltage and whenever there are challenges it can isolate the problematic segment,” he stressed.
On tariff, Zakari noted the law allows adjustment every six months, but regretted that the situation has not been fully communicated with the public even though any time it is done, it is viewed as tariff increase by the masses.
In some instances, the presidential aide noted that tariff may come down, go up or stay flat, saying that what the current administration has continued to do is subsidise electricity for the most vulnerable Nigerians.
He said the federal government has continued to encourage local meter manufacturers, who have already delivered in excess of 500,000 to 600,000 meters in phase zero of the scheme, out of which 400,000 have been installed.
He argued that the national mass metering programme has delivered more meters to Nigerians in four months than what was done in 18 months under the entire Meter Asset Provider (MAP) programme and expressed confidence that the six million metering target will be met.
Through the service-based tariff regime, Zakari noted that new grounds were being broken as the Discos collected N65 billion in December 2020, leading to a 15 per cent increase in delivery of power even before the commencement of capital expenditure.
“So, we are seeing increased liquidity in the system that is likely to continue. The Siemens programme is part of the suite of investments that make up the $3-$5 billion that we are targeting over the next 24 months,” he said.
He noted that despite the improvements, there’s still a lot of gap to be filled and massive investments to be made in the entire value chain of the power sector.
“But we have a gap in this sector in distribution and that’s over $10 billion. If you add everything together, it could be up to $30-$40 billion in terms of the other value chain sectors.
“So, what we are doing is to find all available financing, for instance the emergency funding from the central bank on metering, in-network CAPEX as well as transmission and distribution interfaces. Those are being spent now,” he said.
IMF Staff Completes Virtual Mission to Lesotho
Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.
A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.
The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.
At the end of the visit, Mr. Aslam issued the following statement:
“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.
“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.
“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.
“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.
“The IMF team thanks the authorities for their hospitality and constructive discussions.”
The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.
Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021
Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.
Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.
On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.
Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.
The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.
However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.
The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.
Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.
Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.
Global Debt Rises by $27 Trillion to $226 Trillion in 2020 – IMF
The pandemic has led to an unprecedented increase in debt—issued by governments, nonfinancial corporations, and households the IMF estimated in the latest Fiscal Monitor report. In 2020 global debt reached $226 trillion and increased by $27 trillion, the IMF estimated Wednesday (October 13) in Washington, DC.
High and growing levels of public and private debt are associated with risks to financial stability and public finances, said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department.
“According to preliminary estimates from the Global Debt Database, global debt by governments, households, and non-financial corporations reached $226 trillion. That represents an increase of $27 trillion relative to 2019. Both the level and the pace of increase are record highs. We know that high and rising debts increase risks to financial stability and public finances,” Gaspar said ahead of the Fiscal Monitor release.
Gaspar emphasized that countries with a high credibility fiscal framework benefit from better bond market access. They also experience lower interest rates on sovereign bonds.
“A strong message from the fiscal monitor is that fiscal credibility pays off. Countries that have credible fiscal frameworks benefit from better and cheaper access to bond markets. That’s a precious asset to have in an uncertain and difficult times like COVID 19. Fiscal credibility pays off!,” added Gaspar.
He also recognized that while the international community has provided critical support to alleviate fiscal vulnerabilities in low-income countries, still more is needed.
“In 2020, the IMF’s rapid financing and the G20 Debt Service Suspension Initiative contribute to make resources available to the countries that need it the most. But more is needed. With a general allocation of SDRs of $650 billion, liquidity has been provided, but much more could be achieved if rich countries would make part of their resources available to the developing world. By doing so, donors would be contributing to fighting the pandemic and to the achievement of sustainable and inclusive growth,” said Gaspar
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