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Epileptic electricity to persist as Nigerian govt announces 11% increase in gas price

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The Nigerian government has declared a rise in the wholesale cost of gas supplied to power plants, increasing by 11 percent. This equates to a raise from $2.18 to $2.42 per Million British Thermal Unit (MMBTU), amid ongoing challenges in electricity provision across Nigeria.

Engr Farouk Ahmed, the Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), announced the adjustment, elevating the commercial wholesale gas price from $2.50/MMBTU to $2.92/MMBTU. This decision was made after consultations with relevant stakeholders and considering the provisions of the Petroleum Industry Act (PIA) and the established Gas Pricing and Domestic Demand Regulations.

Consequently, electricity generation companies in the country will now incur higher costs to purchase gas. Notably, the Minister of Power, Adebayo Adelabu, had previously criticized the practice of gas pricing in dollars in December of the preceding year.

Gas suppliers had reduced their supply to power plants since January, in response to outstanding invoices totaling over $1.2 billion. To address this, the government intervened in March by disbursing $120 million to the companies, yet the issue of inadequate power supply persisted.

In reaction to this development, Adetayo Adegbemle, an industry stakeholder and Executive Director of PowerUp Nigeria, expressed discontent, stating that the government has effectively increased its ‘subsidy ticket’ burden amid existing challenges, including the impact of the foreign exchange floating policy.

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Interest Rate, High Energy Costs Putting Businesses Under Pressure, LCCI Laments

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The Lagos Chamber of Commerce & Industry (LCCI) has expressed concern about the elevated cost of conducting business in Nigeria, citing factors such as the recent hike in the Monetary Policy Rate (MPR) and the increase in electricity tariffs.

Dr. Chinyere Almona, the director-general of LCCI, conveyed these concerns in a statement addressed to LEADERSHIP. Almona highlighted the Chamber’s dismay over the Central Bank of Nigeria’s (CBN) decision to raise the MPR from 22.75 percent to 24.75 percent, stating that “similarly, we view the recent escalation in electricity tariffs as adding to the already unbearable cost of living and doing business in Nigeria.”

She underscored that these decisions are compounded by challenges in importing and clearing goods at Nigerian ports, with fluctuating import duty exchange rates making business planning arduous. Almona emphasized that feedback from businesses and analysts suggests that these actions will significantly burden the private sector, worsening an already challenging economic landscape.

Almona noted that the private sector, crucial for driving growth and employment in Nigeria, is grappling with heightened borrowing costs, reduced investment incentives, policy uncertainties, and pressure in the foreign exchange market. She observed that the recent MPR hikes have translated into higher interest rates, hindering businesses’ access to credit for essential functions like working capital, expansion, and sustainability.

While acknowledging the rationale behind removing the subsidy on electricity supply to attract foreign investors with a cost-reflective tariff, Almona advocated for subsidizing production rather than consumption. She urged for an extensive metering program to cover all electricity consumers and emphasized the necessity of a robust regulatory and policy framework to attract more foreign investments into the power sector.

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Almona pointed out that small and medium-sized enterprises (SMEs) are disproportionately affected by the MPR hike policy, given their thin profit margins and reliance on affordable credit. The surge in borrowing costs stifles their ability to invest in productivity enhancements, hire new employees, and contribute to economic growth.

The Chamber urged the CBN to reconsider its monetary policy stance and refrain from further interest rate hikes. Almona also suggested that the CBN explore alternative policy measures to facilitate credit access, encourage investment, and support entrepreneurship. Additionally, she recommended creating an enabling environment for local meter manufacturing to address the gap in meter deployment.

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Naira appreciates N351 against Dollar at forex in one month

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According to data from FMDQ on the dollar exchange rate spanning from March 8 to April 5, 2024, the Naira has experienced a positive shift, appreciating by N351.12 against the US Dollar within the past month. This indicates an increase from N1,602.17 on March 8 to N1,251.05 per Dollar on Friday. This appreciation amounts to a 21.9 percent increase during the mentioned timeframe, signaling a continued strengthening of the Naira since the previous month.

Muda Yusuf, the Director of the Centre for the Promotion of Private Enterprise, attributed this sustained appreciation of the Naira in the foreign exchange market to recent forex reforms implemented by the Central Bank of Nigeria.

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What you must know about new Electricity Tariff hike in Nigeria

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After the Nigerian Electricity Regulatory Commission (NERC) approved a 250 percent increase in electricity tariffs on Wednesday, DAILY POST provides an overview of what Nigerians need to understand about the hike.

It’s worth noting that NERC approved a rate of N225 per Kilowatt for ‘Band A’ electricity consumers in Nigeria. This marks a significant departure from subsidized electricity in the Nigeria Electricity Supply Industry, amidst ongoing issues with inconsistent power supply nationwide.

Affected Customer Base:

NERC specified that only customers categorized under Band A, who receive a minimum of 20 hours of power supply from the eleven electricity distribution companies, are impacted by the increase. According to Musiliu Oseni, the Vice Chairman of NERC, this affects only 15 percent of Nigeria’s 12.12 million electricity customers. Customers in bands B, C, D, and E, who receive less than 20 hours of power supply, are not subject to the tariff hike.

Implications of the New Tariff:

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This tariff hike translates to a 250 percent increase in the cost of electricity for consumers in Band A, effectively eliminating electricity subsidies for them. Band A customers, who make up 15 percent of urban households in Nigeria, consume 40 percent of the country’s electricity. However, this increase won’t necessarily result in improved electricity supply for the affected customers.

Commencement Date of the Hike:

As per the new tariff order, electricity distribution companies began implementing the new rates on Wednesday, April 3, 2024. This means that Band A customers have started paying 300 percent more for electricity. It’s important to note that since January 2024, customers across all bands have been experiencing inconsistent power supply in Nigeria. The Minister of Power, Adebayo Adelabu, attributed this to constraints in gas supply.

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