Nigeria’s President Muhammadu Buhari has approved the much-anticipated electricity tariff increase effective from September 1st, 2020. This is according to a report in Thisday Newspaper.
The Nigerian Electricity Regulatory Commission (NERC) had approved service reflected tariffs for the electricity sector and was due to commence July 1, 2020 after it was initially postponed from April 1, 2020. However, this was suspended after reports indicated Electricity Distribution Companies, DisCos, had pushed for a postponement until key areas of disagreement are sorted.
According to Thisday, the president ” may have finally approved the official implementation of cost-reflective tariffs for the Nigerian Electricity Supply Industry (NESI),” with the tariff now set to go live on September 1, 2020. The report also indicates the president signed off the tariff increase on Tuesday following pressures by the World Bank.
Just a few months ago, the National Assembly promised tariffs will not increase until the first quarter of 2021 following several deliberations it held with stakeholders.
In the course of the meeting, the DISCOs too admitted that they were not well prepared for the planned hike in tariffs even though they so much desired the increase. The meeting agreed to defer the planned hike till first quarter of next year while the leadership of the National Assembly promised to meet with President Muhammadu Buhari on the issue.
The agreement here is that there is not going to be any increase in the tariffs on July 1st,” Lawan said at the end of the meeting.
“The Speaker and I, we are going to take appropriate action and meet with the President. We are in agreement here that there is no question on the justification of the increase but the time is simply not right and appropriate measures need to be put in place. So between now and the first quarter of next year, our task will be to work together with you to ensure that we put those blocks in place to support the eventual increase in tariffs,” the President of the Senate, Ahmad Lawan
It is unclear whether the National Assembly will once again wade into this matter.
World Bank Pressure
Nigeria applied for a $3 billion world bank loan from which $1.5 billion and another $1-$1.5 billion loan is for State Governments. However, as reported earlier, the world bank expects Nigeria to meet certain preconditions before the loan is disbursed. Some of the conditions we gather include;
- Unification of the exchange rate
- Introduction of new electricity tariffs
- Removal of fuel subsidy.
The World Bank is also reported to have earmarked $750 million for the Power Sector and reportedly will not disburse the loans if the power sector is not operating a cost-reflective tariff regime. However, it appears DisCos had some issues to clarify with stakeholders such as the Regulators before a new tariff can be approved.
What this means: By giving presidential approval it seems inevitable that new electricity tariffs could kick in starting September 1st, 2020.
- This means most Nigerians will now have to pay more for electricity.
- Electricity is a major component of Nigeria’s inflation rate which has galloped to 12.82% as of July 2020.
- It is thus, inevitable that Nigeria’s inflation rate will remain high in the months to come.
- It is also expected that the tariff increase should be commensurate with an increase in power supply.
NNPC set to declare first dividend to Nigerians
The Nigerian National Petroleum Corporation (NNPC) has announced that it will declare its first dividend to Nigerians as it prepares to release its 2020 financial statements in the third quarter of this year.
This is coming at a time the Federal Government is planning to commercialize and privatize the operations of NNPC for better efficiency and to put it on a bigger global stage.
This was disclosed by the Group Managing Director of NNPC, Mele Kyari, while delivering an address at the opening ceremony of the Nigeria Annual International Conference and Exhibition organised by the Society of Petroleum Engineers, on Monday in Lagos.
What the Group Managing Director of NNPC is saying
Kyari said, “Everything we are doing must align with the wider national interest. And therefore, NNPC, being the representatives of all of us and, is, of course, a very potential global player – this is our ambition and we are getting there.
“And I can tell you, within the next month or two maximum, we will publish our statement of accounts for 2020. And I can also confirm to you that for the first time in our history, we will declare dividend to the Nigerian people.”
Kyari said the state oil giant is expected to play a key role in the global transition to low carbon energy in the near future. He pointed out, “Our tremendous natural gas reserves have become our greatest enabler to smooth transition to low carbon energy. We are deepening natural gas utilisation under the national gas expansion plan to earn more carbon credits and create a net zero carbon environment in line with our drive to becoming an energy company of global excellence.’’
Nigerian refineries lose N104.3 billion in 13 months
Nigeria’s refineries lost a total of N104.3 billion in 13 months while not processing any crude oil from the refineries during the period, according to the Nigerian National Petroleum Corporation’s latest report.
The plants continued to lose money on a monthly basis, according to a study of the revised consolidated refinery financial performance from February 2020 to February 2021.
The Nigerian National Petroleum Corporation (NNPC) is in charge of three refineries: Kaduna Refining and Petrochemical Company, Port Harcourt Refining Company, and Warri Refining and Petrochemical Company.
According to the corporation’s figures, the refineries’ monthly operational expenses exceeded their income for the whole 13-month period.
The refineries’ consolidated losses in February, March, April, May, June, July, and August 2020 were N9.36 billion, N10.3 billion, N9.69 billion, N9.55 billion, N10.23 billion, N9.1 billion, and N7.1 billion, respectively.
The facilities lost N7.04 billion, N5.49 billion, N5.99 billion, and N8.28 billion in September, October, November, and December 2020, respectively.
Their consolidated losses persisted in 2021, with losses of N5.37 billion and N6.88 billion in January and February of this year, respectively, according to the corporation’s most recent statement.
Reason for the surge in expenses
Because of ongoing refinery rehabilitation work, the three refineries processed no crude in February 2021, and their combined yield efficiency is 0.00%. However, the refineries are currently being revamped, which is expected to improve capacity utilization once completed, resulting in declining operational performance.
Since January 2017, the NNPC has been using a merchant plant refineries business model, according to the corporation. The model, it added, took into account the product value and crude expenses, noting that the aggregate value of output by the three refineries (at import parity price) for February 2021 was almost N0.10 billion.
It went on to say that because there was no output in February 2021, there was no related crude plus freight cost for the three refineries, but that operational expenditures were N6.98 billion.
Oil marketers say petrol will sell for N230 per litre in March
Oil marketers have insisted that petrol will sell for as much as N230 per litre in March.
Oil marketers, on Sunday, said that Premium Motor Spirit (PMS) otherwise known as petrol is to sell for as much as N230 per litre in March.
This is coming against the background of insistence by the Nigerian National Petroleum Corporation (NNPC) that it has no plans to increase the price of petrol in March.
There has been a reported reappearance of queues at filling stations in some parts of Lagos and Abuja as panic buying and petrol hoarding occurs in some filling stations.
According to a report by New Telegraph, the National Operations Controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi, declared that the whole nation had crossed the bridge and that there was no hiding place for a hike in fuel price.
What the IPMAN top officials are saying
Osatuyi said, “I have just returned from a meeting in Abuja. What I have observed is that many stations have closed down and there are queues in many places in both Lagos and Abuja. Nigeria has crossed the bridge, there is no hiding place, the N1.2 trillion, which was hitherto annual spending on subsidy, will be borne by the market.
“As it is, the prices of crude oil have gone up to $67 per barrel and, with this, the price of PMS will be between N220 per litre and N230 per litre. I was told by someone that the Group Managing Director of NNPC told them that the official price is likely to be N206 per litre.
“As it is now, all the stations that have shut down their gates must have heard information before they took that action. I want us all to wait by tomorrow we will all see clearly what will happen. There have been annual spending of N1.2 trillion on fuel subsidy and now that the subsidy has said to be abolished, that money must come from somewhere.
’The money must be coming from somewhere. “NNPC is not an NGO (non-governmental organisation), there is no budgetary provision for subsidy again and instead of wasting it on subsidy, it should be deployed to other sectors,’’ he said.
On what can be done to cushion the negative effects of higher fuel price, Osatuyi said: “This plan to cushion the negative effects of higher fuel price should be the next important thing. The government can do the free conversion of vehicle from fuel to gas. This should be done to help Nigerians who will definitely be affected by this fuel price hike.”
On his part, the IPMAN National Public Relations Officer, Alhaji Suleiman Yakubu, condemned the panic buying and return of long queues at some filling stations within Abuja.
While assuring Nigerians that the normal supply of petroleum products would soon be restored with the commencement of loading at various depots, Yakubu said the increase in the global price of crude oil has affected the price of petrol.
He said, “We want to assure the buyers that government and marketers are doing everything possible to ensure that the products are available in every filling station within a few days starting from today (Sunday).’’
What you should know
- The state oil giant, NNPC, had in a press statement on Sunday, assured Nigerians that despite the increase in the price of crude oil, it has no plans to increase the ex-depot price of petrol in the month of March. This is coming after it gave a similar assurance earlier in February, that it was not going to increase the price of the product in February.
- NNPC explained that the decision was to allow ongoing engagements with organized labour and other stakeholders on an acceptable framework that will not expose the ordinary Nigerian to any hardship, to be concluded.
- This uncertainty has led to hoarding of the product by depot owners and some retail marketers, which has led to the return of queues in some filling stations.
- The Federal Government had in March 2020, announced the removal of fuel subsidy and full deregulation of the downstream sector of the oil industry, which will allow market forces to determine the price of the product.
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