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Power, Still in Need of a Leg-up – Coronation Merchant Bank

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Power shortages remain a prominent infrastructure gap in Nigeria. For businesses located in Nigeria, self-generation places pressure on operating expenses. Household wallets are also significantly affected by the same expense. The availability of power is a catalyst to boosting levels of industrial activity for economic development. The FGN estimates national energy demand at c.28,000 megawatts (MW).

Therefore, improving power sector performance, particularly in manufacturing and services will be central to unlocking economic growth post COVID-19. Several African countries suffer from insufficient electricity generation capacity as well as inadequate and poorly maintained transmission and distribution networks that significantly affect their socio-economic activities. Based on data from the International Energy Agency (IEA), in 2019, 81% of the African population had access to electricity in urban areas while only 37% had access to electricity in rural areas.

Turning to the Nigerian electricity landscape, according to the latest Tracking SDG7 report, about 89 million Nigerians (45% of the population) have no access to electricity. The World Bank estimates that Nigeria suffers an annual economic loss due to unreliable power supply at between 5-7% of the country’s GDP.

There is uncertainty around the exact number of back-up generators in the country. Some studies have estimated that Nigeria could have as much as 15,000MW installed capacity of power generators. Other studies have put the installed generator capacity in Lagos alone at around 16,000 MW. These generators range from small 0.5 KVA for a small kiosk to large 75 KVA / 60 kW generators servicing residential estates and industries across the country.

The Transmission Company of Nigeria (TCN) disclosed that the power sector recorded national peak generation of 3,844.3MW on 01 November ‘21, compared with 5,802MW recorded in 01 March ’21.

Metering remains a challenge. To attempt to solve this issue, the FGN plans to provide up to 4 million meters to Nigerians in the second phase of its National Mass Metering Programme (NMMP). The first phase of the initiative has led to the distribution of about 750,000 meters nationwide within eight months. This is an improvement with regards to installation speed given that the preceding Meter Asset Provider (MAP) programme recorded 350,000-meter installations in over 18 months.

According to the Nigerian Bulk Electricity Trading Company (NBET), the electricity distribution companies (DISCOs) remitted revenues totalling N91.3bn to the NBET in Q2’21. This is a 22.6% decline from the N111.8bn recorded in the previous quarter. The decline in revenues from the 11 DISCOs can be partly attributed to poor power supply in Q2 ‘21. The decline in revenue can also be attributed to the high technical and commercial losses that have been exacerbated by energy theft as well as consumers’ apathy to payments under the prevailing practice of estimated billing.

A better energy mix of non-renewable and green energy will accelerate the process of attaining access to power for all. The FGN targets 30% of national energy to come from renewables by 2030. In April 2021, the FGN began implementing its plan to deliver electricity through solar energy to about 25 million Nigerians whose communities are off the national power grid through the Solar Power Naija programme. The initiative aims to create five million connections through a N140bn financing programme.

Furthermore, the European Union granted an additional EUR15m (USD17.4m) to fund the second phase of Nigeria’s renewable energy and energy efficiency sector under the Nigerian Energy Support Programme (NESP). Additionally, the Agence française de développement (AFD) recently invested c.USD70m to fund renewable energy and efficient energy projects in the country to bridge the nation’s power needs and reduce environmental pollution. The AFD fund could guarantee electricity supply to c.80 million Nigerians affected by power shortages.

The lack of reliable power supply has stifled economic activity, private investments, and job creation. An industrial take-off, which will be supported by improved power supply, is required if Nigeria is to achieve sustainable double-digit GDP growth. Forward steps should also be taken to modernise power infrastructure (with particular emphasis on transmission), reduce the Aggregate, Technical, Commercial and Collection (ATC&C) losses, as well as increase transparency and contract enforceability through enhanced regulatory oversight.

Increased investments targeted towards boosting renewable energy generation would also assist with increasing productivity in sectors like agriculture and manufacturing.

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Economy

Abuja to Kaduna Train Service to Resume on Monday, November 28, 2022

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Lagos-Ibadan Train Services - Investors King

Barring any last-minute change, Abuja to Kaduna train service is expected to resume operation on Monday, November 28, 2022.

This is coming after eight months when operation along the route was suspended due to a deadly terrorist attack on the train. 

It could be recalled that the attack which happened at night led to the death of no less than eight people while 168 passengers were kidnapped. 

Early this month, the minister of transportation, Mu’azu Sambo disclosed during a presidential briefing that Abuja to Kaduna train service will resume operation before the end of this month, Investors King learnt. 

Mu’azu noted that following the release of the last badge of those that were held hostage, the ministry has been putting security measures in place to forestall any future occurrence of such a sad experience.

Sources confirmed that contractors were at the Idu rail station to install the tracker and cameras which will enhance security along the train corridor. 

Speaking in the same line, the Managing Director of the Nigeria Railway Corporation, Fidet Okhiria disclosed that the government has set up a high-level committee that will fine-tune a way to ensure adequate security for both the train passengers and the facilities. 

“Government has set up a committee to ensure maximum security for both train passengers and facilities during operation. We believe proper security measures should be put in place and until then, the Federal Government won’t approve the functioning of the train station,” Okhira stated in September. 

Meanwhile, the federal government has stated that millions of Nigerians will soon prefer to travel by train as the government is committed to connecting virtually all states in Nigeria to the train services. 

The ministers of transportation who disclosed this during a working visit to the train station in Lagos State noted that the ministry has a number of ongoing rail projects which include Lagos to Kano, Port Harcourt-Maiduguri, and Kaduna to Kano.

He revealed that at the completion of the rail projects, it will be much easier for Nigeria to commute from one state to another. 

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Increase in Price of Food is Imminent; Farmers Association Warns

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Agriculture - Investors King

Farmers under the aegis of the Smallholder Women Farmers Organisation in Nigeria (SWOFON) have joined a growing list of associations and experts who have warned of food scarcity in Nigeria.

SWOFON noted during an event in Abuja that Nigerians will likely spend more on food if the federal government failed to address the challenges faced by farmers due to flooding. 

Investors King had reported that a series of ravaging floods destroyed several houses and farmlands across the country. 

According to the National President of SWOFON, Mary Afan, if relevant government agencies failed to give financial aid to farmers and improve security around the country, it could lead to high cost of food which might result in increased hunger for the vulnerable Nigerians. 

“The implication of this massive flooding is that the prices of food will rise higher owing to its unavailability. 

“This will deal a great blow to the over 90 million Nigerians currently leaving below the poverty line and the over 21 million Nigerians currently experiencing acute hunger,” the president noted. 

She noted that small farmers who are women have lost many of their farmlands due to the ravaging floods. She added that members of the association are also short of seeds to plant during the next farming season. 

“While some farmers are gradually returning to their homes as the water recedes to pick up whatever is left of the destruction, others cannot go back home or to their farms. Some have lost the courage to start all over and others have totally lost hope,” she lamented. 

Also speaking at the event, the Director-General of the Budget Office of the Federation, Prof Ben Akabueze admonished the association to seek federal government intervention through the national assembly. 

It could be recalled that the Minister of Humanitarian Affairs, Disaster Management and Social Development, Hajiya Sadiya Umar Farouq had disclosed that about 123,000 farmlands were partially destroyed while about 392,000 farmlands were totally destroyed due to the devastating floods. 

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Economy

Nigerian Governors Forum Rejects Sale of 10 Power Plants by FG, Considers Legal Action

State governors objected sales of 10 power plants

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The 36 state governors in Nigeria under the aegis of the Nigerian Governors Forum (NGF) have announced their rejection of the sale of 10 power plants in the country.

The governors who issued a communique noted that they going to file a lawsuit against the federal government to stop the privatisation.

According to the communique which was signed by the chairman of the Nigerian Governors Forum, Aminu Tambuwal, the forum has ordered its lawyers to approach the federal high court to stop the privatisation. 

They argued that the power plants which are under the National Integrated Power Projects (NIPPs) and managed by the Niger Delta Power Holding Company (NDPHC) are owned by the three tiers of government. That is the federal, state governments, and local government councils.

Investors King could recall that in 2021, the National Council on Privatisation (NCP) approved the adoption of a fast-track strategy for the privatisation of five major power plants. The power plants include Geregu II in Kogi State, Omotosho II in Ondo State, Ihovbor in Edo State, Olorunsogo II in Ogun State, and Calabar power plants.

Other power-generating companies lined up for privatisation include Omoku Generation Company, Ogorode Generation Company, Gbarain Generation Company, Alaoji Generation Company, and Egebma Generation Company.

Although the House of Representatives had also objected to the privatisation, the Bureau of Public Enterprises (BPE) nonetheless announced that it has commenced due diligence assessment of the 16 pre-qualified investors shortlisted for the acquisition of the plants. A development that is in contrast to the position of the state governors. 

Meanwhile, the governors’ forum also noted that it is working with the federal government to address the issue of flooding which has ravaged many homes and farmlands across the country. 

The forum stated that all the affected states are collaborating with the Ministry of Agriculture and Rural Development, Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development, National Emergency Management Agency, the CBN, and the World Bank to ensure emergency interventions to ameliorate the adverse impact of the devastating flood. 

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