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Nigeria: Electricity tariff hike imminent as govt raises gas price

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The price of natural gas for power production businesses has been revised by the Nigerian government to $2.42 per metric million British thermal units (MMBtu) as of Monday. This is an increase from the previous rate of $2.18mmbtu.

More than 70% of Nigeria’s electricity is produced by gas-fired thermal power facilities. As a result, when the Nigerian Electricity Regulatory Commission conducts another tariff review, the increased cost of the item can increase the rate that power users must pay.

The previous price of natural gas was used to determine the Multi-Year Tariff Order, which NERC announced in January 2024 for the power distribution firms.

Since gas is a major component utilized in the production of power, there is a high tendency for an upward revision of power tariffs based on the most recent cost of the commodity.

Gas producers have consistently demanded an increase in the product’s price, citing both domestic and foreign oil and gas businesses, emphasizing that doing so would encourage them to increase production.

Ahmed stated in the announcement on Monday that a clear legislative framework for determining a market-based pricing regime for the domestic gas market was established by the Petroleum Industry Act 2021, which was gazetted in August 2021 and approved by the President on August 16, 2021.

The head of NMDPRA went on to say that the most recent action was done under section 167, the third and fourth schedules of the PIA 2021, which required the regulator to ascertain the marketable wholesale price of natural gas delivered to the strategic sectors as well as the Domestic Base Price.

He said, “The DBP at the marketable gas delivery point under Sector 167(1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles.

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Nigeria’s GT Holding plans $750 million capital increase

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Nigerian banking group, Guaranty Trust Holding Plc, wants to raise up to $750 million in capital and will ask its shareholders for permission to do so next month. It will join other banks in increasing their capital to meet new goals.

The Central Bank of Nigeria set minimum capital standards for banks last month. This is meant to make the country’s financial system stronger and give lenders a bigger chance to help the economy grow.

According to Guaranty Trust Holding Plc, Guaranty Trust Bank is one of the best banks in Nigeria. The company said on Friday that it would seek shareholders for permission to raise the money at a meeting on May 9. In the last few weeks, competitors Access Holdings and FBN Holdings have both said they want to raise money. To meet the new level set by the central bank, more than 20 banks in Nigeria will need to get more capital within two years.

A statement from the CBN in March said that commercial banks with foreign licenses must now have a minimum capital base of N500 billion.

The recapitalization is a big boost that will help these banks compete in the world market for money. Regional banks must have at least N50 billion in capital, while national banks with permission must have at least N200 billion.

The apex bank said that lenders need more buffers to help Nigeria’s economic growth goals, especially since the local naira has lost a lot of value since June of last year.

Credit rating agency Fitch said on Wednesday that over the next two years, Nigerian banks will likely issue a lot more shares of stock and merge with other banks, since some small or medium-sized lenders may have trouble getting cash.

Nigeria’s banking system has been through several crises, with the worst ones happening in 2008 and 2009. The number of banks dropped from about 90 in 2005 to 24 by 2006 and to 20 commercial banks by the end of 2011. This was because of a program of recapitalization and consolidation.

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Ethiopia might devalue currency to secure IMF loan

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Ethiopia may need to decide on a big currency devaluation soon to get a rescue loan from the International Monetary Fund (IMF).

In December, East Africa’s most populous country went bankrupt, making it the third African country in as many years to not pay its debts. The country already had high inflation.

Ethiopia hasn’t gotten any money from the IMF since 2020, and its last loan deal with the fund fell through in 2021. In late 2022, the federal government and a rebellious regional authority made a deal to end a cold war that had been going on for two years.

Although the IMF has not said that currency reform is necessary for its backing, it however maintained that progress was made during its most recent visit. However, the Fund usually favours flexible, market-determined exchange rates. Ethiopia has requested $3.5 billion of support from the IMF, sources told Reuters last year.

The birr currently trades at between 117 and 120 per dollar on the black market, which is more than double the official rate of about 56.7. This is because there is a constant lack of foreign cash and the exchange rate is tightly controlled.

“It seems that the Ethiopian authorities have found accepting the demands of the IMF hard,” said Abdulmenan Mohammed, an Ethiopian economic analyst based in Britain.

“The Ethiopian authorities are worried about the devaluation of the birr, (which) would have serious negative economic repercussions, including soaring inflation… and surging foreign currency denominated debts in terms of birr.”

Early in 2021, Ethiopia asked the G20’s Common Framework to restructure its debt. This was set up in response to the COVID-19 pandemic to include new creditor countries like China and India. Other African countries like Tunisia and Zambia also suffered a similar fate with their foreign debt at the time.

As of the end of March, Ethiopia’s foreign debt totals $28.2 billion. According to Boston University’s Chinese Loans to Africa Database, the country’s biggest bilateral creditor, China, agreed to stop collecting its debts in August 2023. From 2006 to 2022, China promised to give the country $14 billion.

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