Energy
DisCos lose billions as manufacturers insist on paying old tariffs
Power Distribution Companies (Discos) are reportedly contemplating widespread disconnections of several companies and factories, fearing substantial losses estimated in billions of naira.
Recall that following the surge in electricity tariffs for Band A customers in the nation from N66/kWh to N208/kWh, the Manufacturers Association of Nigeria (MAN) lodged a petition with NERC, urging a reversal of the new electricity rates for its members.
Citing numerous economic challenges confronting manufacturers and business owners in the country, the association argued that the escalated electricity tariffs would further exacerbate the hardships of conducting business in the nation.
The Manufacturers Association of Nigeria (MAN) instructed its members across the country to persist in paying the previous rate of N66/kWh to the distribution companies (DISCOs) pending a resolution of the petition filed by the association to the National Electricity Regulatory Commission (NERC)
NERC approved the new tariff due to financial illiquidity and mounting losses incurred by the DisCos stemming from the lack of a cost-reflective tariff within the power sector.
The Minister of Power, Adebayo Adelabu, had earlier said that the federal government was subsidising about 67 percent of the power sector, expected to amount to N2.9 trillion by the end of 2024.
The report also showed that about 52 percent of electricity costs would not be subsidised monthly as the government has halted a significant portion of the electricity subsidy.
With the refusal of MAN to pay the tariff, DisCos are expected to bear more losses in the coming months.
According to the latest report by NERC, DisCos, revenue collections stood at N294.95 billion out of the N399.69 billion billed to customers in the fourth quarter of 2023, indicating a N105.1 billion loss in total.
Manufacturers believe they are being unfairly targeted with high electricity tariffs, insinuating a government strategy to shift the burden of electricity cross-subsidies onto them, a responsibility previously borne by the government before it ceased subsidising the sector.
The aim is to impose cost-reflective rates on these companies.
Electricity cross-subsidy is a process where tariffs are adjusted so that customers with high demand and more reliable power supply pay higher rates.
This is done to compensate for customers who receive limited power and face affordability challenges.
To secure payment of the revised tariff, sources claim DisCos are threatening widespread disconnection targeted at companies and factories that have refused to pay the new rate implemented by NERC.
An official who chose to remain anonymous disclosed that the power distribution companies would have no choice but to disconnect some of these companies from their services as the old rate remains unstainable for the electricity providers.
“I think DisCos have no choice but to embark on widespread disconnection to avoid carrying over these losses.
“Meanwhile, we also understand some of the companies are seeking alternatives such as gas and ‘eligible’ customers to reduce their electricity cost,” the source said.
Furthermore, the Director-General of MAN, Mr. Ajayi Kadiri, stated in his correspondence that members have received bills indicating the tariff hike, with some being notified of impending electricity supply disconnections to their factories.
“Our members have been served bills reflecting the increase and some have been informed that electricity supply to their factories will be cut off.
“This is rather unfortunate and does not demonstrate the willingness to engage manufacturers with a view to arriving at a mutually beneficial outcome,” Kadri said.
Last Thursday, a panel of NERC adjourned its verdict on the petition by the Manufacturers Association of Nigeria, MAN, indefinitely.
The Vice Chairman of NERC, who doubles as Chairman of the panel, Dr Musiliu Oseni, said that the commission would take some time to review the petition and come up with a fair verdict.
On their part, however, the counsel to MAN, Tola Oshodi, urged the electricity regulator to reverse the recently hiked tariff for Band A consumers, as it was inimical to the manufacturing sector.
“We are here to appeal. MAN was not given an opportunity to make representation before the new tariff was fixed.
“MAN is recognised in the guidelines as a stakeholder that must be engaged before such decisions, but it never happened. The provision for stakeholders’ engagement was not complied with.
“We appeal that the new tariff should be suspended as we go through the process of engagement,” he said.
Mr Tayo Aduloju, the Chief Executive Officer (CEO), Nigerian Economic Summit Group (NESG), says with targeted approaches, Nigeria can still meet some of the Sustainable Development Goals (SDGs) indicators.
Aduloju said this on Friday in Abuja, at a news conference to announce the Policy Innovation Center’s (PIC) annual Gender and Inclusion Summit.
According to him, though Nigeria is not on course to meet the SDGs target set for 2030, there are few indicators it can reach because as there are 17 SDGs with 169 targets and indicators.
“I would say right now we are not on course to reach anyone, but we can still achieve some milestone going forward.
“For example, we can turn around birth registration in 12 months; there are a few other indicators that I think Nigeria can reach.
“We have recommended a mother and child compact between the Federal Government and the Minister of Health and Social Welfare seems willing to push it.
“This is because we think that if we met those ones, some of the SDGs will be met automatically,” he added.
According to Aduloju, there is a parallel relationship between multi-dimensional poverty and gender inequality, with countries performing poorly on the Global Gender Report also exhibiting high severe multi-dimensional poverty.
He said that multi-dimensional poverty encompasses deprivations in health, education and living standards.
“The World Bank points out significant gender disparities in labour participation in Nigeria, with about 65.5 per cent of men participating compared to around 52.1 per cent of women.
“The National Bureau of Statistics indicates that about two-thirds of Nigerians are multi-dimensionally poor, lacking income and basic amenities like healthcare, education, and clean cooking fuels,” he said.
He added that conflict, climate change, inflation, and increasing food prices were among the pathways contributing to the rise in high food insecurity and malnutrition rates.
He, however, said that the solution remains a collective effort by all stakeholders to tackle the issues as it could no longer be achieved by government alone.
On her part, the Executive Director, PIC, Mrs Osasuyi Dirisu, said that Nigeria was facing unprecedented times owing to a weak and non-inclusive economy, volatile macro-economic environment, security challenges and weak economic competitiveness.
She, however, said that addressing poverty in Nigeria could not be business as usual.
“Ending poverty and reducing inequality are part of the SDGs and a wide range of approaches have been identified to reduce poverty and inequities.
“To design effective poverty reduction programs, it is important to understand pathways to poverty, evidence based approaches that work and linkages to multi-sectorial inequities.
“We need to identify what works for poverty reduction in Nigeria and sustain the commitment to poverty reduction by intentionally designing and implementing contextually relevant solutions driven by a policy enabling environment,” Dirisu said.
Speaking about the summit, she said that it would hold from Sept. 4 to Sept. 5 with “Reimagining Gender-Inclusive Pathways and Partnerships for Poverty Reduction” as theme.
She said that the summit was expected to explore the impacts of multi-dimensional deprivations on health, education, livelihood, and living standards.
Conceptualised in 2022, the summit is an annual event to provide an inclusive platform to explore transformative ways to advance gender equity, inclusion and gender-responsive governance in Africa.
The 2024 summit is expected to leverage the collective power of government, development partners, civil society, academia, and the private sector, highlighting the importance of strategic partnerships for inclusive development.
PIC, an initiative of NESG is an institutionalised behavioural initiative in Africa supporting the delivery of better policies and innovative solutions for social impact.
Chevron Nigeria Ltd. has restated commitment to its partnership with Nigeria in ensuring safe, reliable, and efficient operations in the country.
Chevron’s General Manager, Policy, Government and Public Affairs, Mr Esimaje Brikinn, made this known in a statement on Friday.
Brikinn said also that the company remained committed to delivering affordable, reliable, ever cleaner energy supply that was critical to the development of the Nigerian economy.
“At Chevron, we believe oil and gas will remain a viable component of the energy mix.
“The company believes that the future of energy is lower carbon even as it continues to add incremental volumes to its oil production, and support gas development in a clean manner, “ he said.
The manager said that over the years, Chevron had encouraged the participation of Nigerian companies in the oil and gas industry.
He said that the company, working with the Nigerian Content Development and Monitoring Board, continued to foster competence and competitiveness among Nigerian indigenous contractors and suppliers.
According to him, the company does this by adopting the participatory-partnership model.
“Chevron Nigeria believes that by investing in local communities, we can create a sustainable future for all.
“Our local content strategy is focused on three key pillars: capacity building (training, mentoring among others), local procurement, and social investment (community development projects mainly in health, education and economic development), “ he said.
Recently , the company was awarded the Best Exhibitor award at the 2024 edition of the Nigerian Oil and Gas Energy Week conferences and exhibition held on July 3 in Abuja.
Nigeria’s debt to petrol traders has surpassed $6 billion, doubling since early April, as the state oil firm, Nigerian National Petroleum Corporation (NNPC), struggles to cover the gap between fixed pump prices and international fuel costs, according to six industry sources.
This is according to a report by Reuters on Thursday, which tracks data on international petrol prices.
Sources confirmed to the American media outlet that NNPC has capped the pump prices of petrol shortly after the removal of subsidy in May 29, 2023.
The cap on fuel prices has resulted in stability at the pump despite increases in international crude oil prices and the devaluation of the naira against the dollar.
This situation has led many to speculate that the government might have reinstated some form of petrol subsidy, given the discrepancy between market prices and the steady price of the commodity.
According to data from Reuters, NNPC began facing difficulties early this year when late gasoline payments exceeded $3 billion.
The company has yet to pay for some January imports, with traders stating that the late payments now amount to between $4 billion and $5 billion.
Under the terms of their contracts, NNPC is required to pay within 90 days of delivery.
“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source said.
At least two suppliers have already stopped participating in recent tenders after reaching their self-imposed debt exposure limits to Nigeria, the sources said.
This means they will not send more gasoline until they receive payments.
The tension to reconcile the international landing cost of petrol and the fixed price of N617 has deepened the debt of NNPC to the traders, the sources confirmed.
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