Economy

Power: N1tn Debt Threatens NBET Existence

Published

6 years ago

May 14, 2018

Power: N1tn Debt Threatens NBET Existence

The Federal Government is pleading with power distribution companies to make appropriate remittances for the electricity supplied to them in order to avoid the collapse of the Nigerian Bulk Electricity Trading Company.

The country has 11 power distribution companies and they get the electricity that they distribute to customers from power generation companies by purchasing it through the NBET.

The NBET, popularly referred to as the bulk trader, is the bulk power trading arm of the sector collecting funds from electricity distributors to pay the generation firms.

But remittances from the Discos have been persistently poor, a development which the Federal Government notes, may kill the NBET if not addressed.

This is coming as the Federal Government is planning to start naming and shaming power infrastructure vandals as well as communities that support vandalism.

The Minister of Power, Works and Housing, Babatunde Fashola, told the power distributors at the recent 26th meeting with operators in the sector that they would have no business if the NBET could not pay its bills to the Gencos, because the bulk of the Discos’ power was coming from the bulk trader.

Fashola appealed to the Discos to do their best to ensure that the NBET did not die as it was the goose that lays the golden egg, according to minutes of the meeting, which was just put together in preparation for the next edition of the meeting holding today (Monday).

Operators in the sector often complain that power distributors persistently remit far below what is required of them by the bulk trader.

For instance, on March 18, 2018, media reported that the Discos got a total invoice of N44.85bn for the quantum of electricity they received in January this year, but the firms remitted only N2.7bn.

Documents obtained from the NBET on remittances by the Discos for power received in January showed that the firms had a combined remittance of 6.04 per cent for the month.

The bulk trader in its summary of Discos’ and Gencos’ invoices and payments for January 2018 cycle stated that “the total amount invoiced to the Discos for the January 2018 cycle was N44.85bn. Total amount received from the Discos for the January 2018 cycle was N2.7bn (6.04 per cent).”

Also, on March 20, this year, the media reported that the Executive Secretary, Association of Power Generation Companies, Dr. Joy Ogaji, explained that the Gencos were owed about N1tn by the power market, while the power producers owe gas suppliers half of that amount.

About 80 per cent of the electricity generated in the country is from gas-fired power plants, with hydro plants contributing the rest.

“We are owed about N1tn by the electricity market. About half of it is owed to gas companies, because it is as we are paid that we pay them (gas suppliers). And in some cases, we even took loans to pay some of them, because if you don’t pay, you don’t get gas,” Ogaji had stated.

The executive secretary said the NBET was established with the mandate that it would pay the Gencos 100 per cent, “but it has not paid the generation companies 100 per cent. What the NBET has kept telling us is that the Discos are not paying, and the Discos say that consumers are not paying.”

“From the beginning in 2013 till now, the Gencos have not pushed the government like this; we have been enduring, taking loans. But now, even the banks are not giving us loans to buy gas and generate electricity. So, we are in a conundrum,” Ogaji added.

Speaking at the 26th sectoral meeting, Fashola, who chaired the event, stated that while the government continued to actively play its roles in the sector through the NBET, the Transmission Company of Nigeria and the Niger Delta Power Holding Company, the Discos should on their own part improve on the quality and capacity of their networks to stimulate consumers’ willingness to pay for services rendered.

He implored the Discos to improve on their revenue collection efficiencies without extortion through estimated billings and advised them to also make remittances in accordance with the agreement they signed with the NBET.

Fashola reiterated the need for the Discos to take ownership of the Meter Asset Provider Regulation to improve the supply of meters to consumers as well as increase their response time in resolving consumer complaints in a business-like manner.

The indebtedness to the Gencos, among other concerns, made the power generators to drag the government to court two months ago.

The media had reported in March that some Gencos had dragged the government before the Federal High Court in Abuja over what they termed discriminatory practices against their interests and those of gas suppliers.

The firms also accused the Federal Government of conferring preferential treatment on Azura Power West Africa Limited and Accugas Limited at their own expense.

But the NBET insisted at the last operators’ meeting that it could not pay the Gencos on behalf of the Federal Government because it had no funds.

In its presentation on market performance at the April meeting, the bulk trader stated that it received only 25.6 per cent payment from the Discos for the energy they received from the Gencos in the February cycle.

It also stated that the NBET received late payments from the January cycle amounting to 21.08 per cent of the February invoice, bringing the total payment for February to 46.7 per cent.

The bulk trader promised that the total amount received from the Discos would be paid to the Gencos in the period under review before their respective due dates.

Similarly, the Market Operator, in its report at the meeting, stated that the Discos received 84.89 per cent of the total energy sent out by the Gencos, while international customers and other direct customers received 7.53 per cent in the month of February.

The Discos, according to the MO, remitted only 36.55 per cent of their invoices, while a shortfall of 63.45 per cent on remittances by the power distributors on service providers’ charges was recorded.

On plans to name and shame vandals, Fashola told the Niger Delta Power Holding Company to compile a list of all its completed as well as vandalised projects.

He suggested that a name and shame campaign would go a long way in curbing the nefarious activities of vandals and communities, which support them in the future.

The meeting directed the NDPHC to forward the list of all its completed as well as vandalised projects to the ministry through the Permanent Secretary for proper articulation to enable the FMPWH to carry out a name and shame campaign on vandals and communities that support their activities.

On why the Discos were not making appropriate remittances, the firms complained that power users were not making adequate payments, a development that made it tough for the electricity distributors to meet their obligations to the NBET.

The Discos recently stated that members of the Manufacturers Association of Nigeria owed them about N30bn as unpaid electricity bills.

According to the power firms, the debt is among the many other liquidity challenges that have impacted negatively on the sector, particularly on the distribution arm of the industry.

They noted that the debt accumulated after a court injunction mandated the Nigerian Electricity Regulatory Commission not to implement the Multi Year Tariff Order in 2015, which would have led to an upward review of tariffs.

“There are some things that probably have gone beyond the control of the Discos. It will interest you to know that the Manufacturers Association of Nigeria went to court when the 2015 MYTO 2.0 came in. And right now, MAN is owing the Discos an average of about N30bn,” the Chief Commercial Officer, Ibadan Electricity Distribution Company, Deolu Ijose, said at an event in Abuja.

On July 13, 2016, the media reported that a Federal High Court in Lagos entered a judgement against NERC and the electricity distribution companies in a suit opposing the Federal Government’s bid to increase electricity tariff.

Justice Mohammed Idris had declared as null and void any hike in electricity tariff following an announcement of the proposed increase by the then Chairman of NERC, Dr. Sam Amadi.

The court had since May 28, 2015 restrained NERC from giving effect to the proposed hike pending the determination of the suit filed against the move.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Economy

Nigeria to Raise VAT to 10% Amid Revenue Crisis, Says Fiscal Policy Chairman

Published

4 days ago

September 3, 2024

Samed Olukoya

Taiwo Oyedele, Chairman Presidential Fiscal Policy and Tax Reforms Committee, has said the committee working on increasing the Valued Added Tax (VAT) from the current 7.5% to 10%.

Oyedele announced this during an interview on Channels TV’s Politics Today.

According to Oyedele, the tax law the committee drafted would be submitted to the National Assembly for approval.

He also said his committee was working to consolidate multiple taxes in Nigeria to ensure tax reduction.

He said, “We have significant issues in our tax revenue. We have issues of revenue generally which means tax and non-tax. You can describe the whole fiscal system in a state that is in crisis.

“When my committee was set up, we had three broad mandates. The first one was to look at governance: our finances as a country, borrowing, coordination within the federal government and across sub-national.

“The second one was revenue transformation. The revenue profile of the country is abysmally low. If you dedicate our whole revenue to fixing roads it will be insufficient. The third is on government assets.

“The law we are proposing to the National Assembly has the rate of 7.5% moving to 10% from 2025. We don’t know how soon they will be able to pass the law. Then subsequent increases are also indicated in terms of the year they will kick in.

“While we are doing that, we have a corresponding reduction in personal income tax. Anybody that is earning about N1.5 million a month or less, they will see their personal income tax come down. Companies will have income tax rate come down by 30% over the next two years to 25%. That is a significant reduction.

“Other taxes they pay are quite many: IT levy, education tax, etc. All these we are consolidating into a single one. They will pay 4% initially. That will go down to 2& in the next few years.”

Economy

Nigerian Economy Surges 3.19% in Q2 2024, Service Sector Leads Growth

Published

2 weeks ago

August 27, 2024

Samed Olukoya

The Nigerian economy grew in the second quarter of 2024 by 3.19% year-on-year, according to data released by the National Bureau of Statistics (NBS) on Monday.

This is an improvement from the 2.98% growth recorded in the first quarter of 2024 and the 2.51% achieved during the same period in 2023.

The growth was driven predominantly by the service sector, which saw a 3.79% growth during the quarter and contributed 58.76% to Nigeria’s aggregate GDP.

The service sector, which includes industries such as telecommunications, banking, and hospitality, has become a significant driver of economic activity in Africa’s largest economy as it diversifies away from its traditional reliance on oil and agriculture.

In addition to the strength of the service sector, the industry sector also posted a positive performance, growing by 3.53% during the quarter.

This is a notable recovery from the -1.94% decline recorded in the same period in 2023.

The industry sector includes manufacturing, construction, and utilities, which have benefitted from increased investments and improvements in energy supply.

The agriculture sector, a longstanding pillar of the Nigerian economy, experienced a modest growth of 1.41%, slightly lower than the 1.50% recorded in the second quarter of 2023.

Despite the slower growth, agriculture remains vital to Nigeria’s economy, providing employment to millions of Nigerians and contributing to food security.

The overall 3.19% growth in GDP highlights the resilience of the Nigerian economy despite ongoing challenges such as inflation, currency depreciation, and insecurity.

Analysts had predicted a modest growth rate of around 3.16% for the second quarter, closely aligning with the actual performance.

The Financial Derivatives Company (FDC) also forecasted Nigeria’s annual average GDP growth to reach approximately 3.07% in 2024, which is consistent with the International Monetary Fund’s (IMF) revised projections.

The Q2 GDP performance supports these forecasts, providing cautious optimism for the remainder of the year.

While the growth of the Nigerian economy is a positive development, challenges remain. Inflation, particularly in food prices, continues to strain household incomes, and the naira’s depreciation has increased the cost of imports.

Also, infrastructure deficits and insecurity in various regions of the country pose obstacles to sustained economic expansion.

Despite these challenges, the continued growth in the service and industry sectors demonstrates Nigeria’s capacity to adapt and evolve in an increasingly diversified economy. If these sectors maintain their current trajectory, they could help mitigate some of the pressures facing the economy and improve living standards for Nigerians.

The government’s focus on economic reforms, including efforts to attract foreign investment, improve infrastructure, and enhance security, will be crucial in sustaining and building on the positive GDP growth in the coming quarters.

Economic diversification remains a key goal, and the strong performance of the service sector is a promising sign that Nigeria is moving in the right direction.

With cautious optimism, experts are hopeful that Nigeria can leverage its expanding sectors to achieve sustained economic growth and create more opportunities for its growing population.

Economy

WTO’s Okonjo-Iweala Points to Declining Nigerian GDP Growth as Major Concern

Published

2 weeks ago

August 26, 2024

Samed Olukoya

Ngozi Okonjo-Iweala, Director General of the World Trade Organization (WTO), has raised concerns about the country’s declining GDP growth.

Speaking at the annual General Conference of the Nigerian Bar Association (NBA) on Sunday, Okonjo-Iweala highlighted a troubling trend that has marked the Nigerian economy since 2014.

Addressing an audience of legal professionals, policymakers, and economists, Okonjo-Iweala painted a grim picture of Nigeria’s economic performance, noting that the nation’s GDP growth rate has significantly deteriorated over the past decade.

She observed that between 2000 and 2014, Nigeria enjoyed a relatively robust average GDP growth rate of 3.8%, which notably outpaced the population growth rate of 2.6% annually.

This period was characterized by substantial economic advancements and improvements in living standards for many Nigerians.

However, the post-2014 era has been marked by economic stagnation and decline. According to Okonjo-Iweala, Nigeria’s GDP growth rate has turned negative, recording a troubling average decline of 0.9%.

This reversal, she argues, reflects the government’s failure to sustain the positive economic momentum achieved by previous administrations.

“The contrast between the two decades is striking,” Okonjo-Iweala said. “While the early 2000s brought significant economic progress, the subsequent years have seen a marked decline in GDP growth, which has directly impacted the average Nigerian’s quality of life.”

The WTO Director General attributed this decline to a combination of factors, including inconsistent economic policies, lack of effective reform implementation, and broader macroeconomic challenges.

She said despite various reform attempts and temporary economic improvements, Nigeria has struggled to build on and consolidate these gains.

“The inability to sustain economic growth has had severe repercussions,” Okonjo-Iweala continued. “Many Nigerians are facing diminished job prospects and reduced well-being, as the benefits of earlier growth have not been maintained or built upon.”

In her address, Okonjo-Iweala urged for urgent and comprehensive economic reforms to address these challenges.

She called on Nigerian policymakers to focus on strategies that promote sustainable growth, enhance economic stability, and improve the overall quality of life for the populace.

The call for action comes at a time when Nigeria is grappling with various economic pressures, including inflation, currency depreciation, and unemployment.

Okonjo-Iweala’s remarks underscore the need for renewed efforts to stabilize the economy and implement policies that can drive long-term growth and development.