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Nigeria reduces electricity sale to foreign customers to boost domestic supply

Published

8 months ago

May 7, 2024

In a move aimed at increasing local supply, Nigeria’s power regulator has directed the grid operator to reduce supplies to consumers abroad.

The Nigerian Electricity Regulatory Commission (NERC) said in a directive last Friday that the grid operator’s current supply management strategy has severely harmed Nigerians since supply under bilateral contracts—including export to foreign customers—takes precedence over supply to domestic customers.

With effect from May 1, the regulator announced that it would cap the total amount of grid generation accessible to foreign off-takers at 6% for the following six months.

Nigerian power companies have electricity delivery contracts with neighbouring African nations, which provides them with foreign exchange to cover sub-economic tariff revenue. These businesses haven’t always paid their invoices on schedule, though.

Because of a lack of electricity, power outages are frequent in Nigeria, but they have recently gotten worse. Power companies have increased their rates for certain household customers who are expected to receive 20 hours a day or more of power, but the supply cannot keep up with the demand.

Nigerian power companies have bilateral contracts with large domestic users, including industry and government offices, which give them priority supply over normal customers, in addition to agreements with nations like Niger, Togo, and Benin.

The foreign sales cap, according to analysts, may confuse the industry. According to Mikolaj Judson, an analyst with international risk consultancy Control Risks, “operationally, it will require power generation companies to adjust production and distribution, and potentially modify contracts on short notice.”

He added that it will probably make things more difficult financially because it will mean less money coming in from foreign clients and more work for power distribution businesses, many of which already owe big sums to power-producing corporations.

Following the decision on Saturday, the national system’s electricity supply has surged beyond 4,700 megawatts, according to grid service data, after remaining below 3,000 megawatts for a few weeks. On typical days, local customers often receive less than 4000MW.

According to the regulator, off-takers regularly went beyond their agreed levels during peak operations at the expense of other grid users, and current bilateral and international contracts have loose conditions. It further said that penalties for breaking grid rules are not applied.

For 15% of consumers who should have received greater supply but the power companies have not been able to satisfy the stipulated 20 hours, NERC increased prices by 230% last month.

The incapacity of such clients to make timely debt payments may have also played a role in the regulator’s decision to reduce supply to foreign clients.

International consumers owe Nigerian power firms a total of $12.02 million in unpaid debt for services delivered, according to a report released by NERC in the fourth quarter of 2023.

Related Topics:electricity Featured Nigeria

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IMF, Egypt reach agreement for fourth review of Egypt’s $1.2 billion loan request

Published

2 days ago

December 26, 2024

Ifeoluwa Dada

Egypt and the International Monetary Fund (IMF) have reached a staff-level agreement over the fourth review of the Extended Fund Facility arrangement, which might lead to a $1.2 billion payout under the program.

In March, Egypt, struggling with rising inflation and cash shortages, consented to the $8 billion, 46-month facility. Its economic problems were made worse by a precipitous drop in Suez Canal revenue over the last year due to regional tensions.

Over the next two years, Egypt’s government has committed to raising its tax-to-revenue ratio by 2% of GDP, according to the IMF, emphasising removing exemptions rather than raising taxes.

According to a statement from the IMF, this would allow it to expand social expenditure to support vulnerable populations.

“While the authorities’ plans to streamline and simplify the tax system are commendable, further reforms will be needed to enhance domestic revenue mobilization efforts,” the statement said.

According to the IMF statement, Egypt had also committed to maintaining its commitment to a flexible currency rate and to taking more urgent action to guarantee that the private sector became the primary driver of development.

The IMF’s executive board still has to accept the fourth review’s staff-level agreement.

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Libya’s eastern govt accepts petrol subsidy elimination

Published

2 days ago

December 26, 2024

Ifeoluwa Dada

In a recent statement, the eastern government of Libya claimed it had reached a consensus on a plan to eliminate gasoline subsidies and would draft a mechanism to carry out the accord.

Additional information on the idea was not released by the administration led by Osama Hamad, a challenger to the internationally acknowledged Tripoli-based government.

However, it is uncertain if Hamad’s government would be able to carry out the plan in the divided nation.

According to the Global Petrol Prices online tracker, a litre of gasoline costs just 0.150 Libyan dinars ($0.03) in OPEC member Libya, making it the second-cheapest in the world.

Following an uprising against former ruler Muammar Gaddafi in 2011, smuggling networks have thrived in the ensuing political unrest and armed fighting. In 2014, conflicting eastern and western governments separated the nation.

A World Bank analysis estimates that the annual value of fuel smuggling from Libya is at least $5 billion.

In a meeting with Mari Barrasi, the deputy governor of the Central Bank of Libya (CBL), located in Tripoli, and four members of the bank’s board of directors, Hamad in Benghazi supported the idea of removing subsidies.

The CBL’s Benghazi branch offices served as the venue for the conference.

The eastern parliament appointed Hamad in 2023 to succeed Abdulhamid Dbeibah, who had been put in position in 2021 under a U.N.-backed procedure that the parliament said had lost its legitimacy.

Dbeibah, who is located in Tripoli, stated in January that he will conduct a public poll on the topic of eliminating gasoline subsidies, but he hasn’t done anything about it since.

According to CBL figures, gasoline subsidies cost 12.8 billion Libyan dinars between January and November of this year. 4.8 Libyan dinars to $1 is the official exchange rate.