The Federal Government of Nigeria (FGN), through the Nigerian Electricity Regulatory Commission (NERC) may withdraw the licences of eight power distribution companies (DisCos) over breaches of some provisions of the Electric Power Sector Reform Act.
According to the regulatory commission, the eight power firms include Abuja, Benin, Enugu, Ikeja, Kaduna, Kano, Port Harcourt and Yola Electricity Distribution Companies.
The details: In a notice posted on its website, the power sector regulator said it intended to cancel licences issued to the eight DisCos in pursuant to Section 74 of the EPSR Act.
According to NERC, the licences of the 8 DisCos might be withdrawn due to three main fundamental reasons. Essentially, NERC stated that the listed firms had breached the provisions of the Electric Power Sector Reform Act (ESPRA), terms and conditions of their respective distribution licences and the Remittance Order of the year 2019.
Under the Power Sector Recovery Plan (PSRP) approved by the Federal Government, DisCos are liable to relevant penalties/sanctions for failure to meet the minimum remittances requirement in any payment cycle in line with the provisions of its respective contracts with NBET, Market operator (MO) and provisions of the Market Rules.
[READ MORE: Power sector records N2.2 billion loss, here is why]
Highlighting the breaches, NERC stated that the remittances of the 8 DisCos to Nigerian Bulk Electricity Trading (NBET) in July 2019 billing cycle showed failure to meet the expected minimum remittance thresholds. Basically, the commission’s notice showed that all the listed DisCos failed to meet the expected minimum remittance in July.
A look at the report shows that three other DisCos remitted 10% during the period while the highest remittance was 40%, as they all fell short of the expected minimum remittance stipulated by NERC.
It was further disclosed that the objective of Order was to place the DisCos on a path of meeting their contractual/performance obligations to Nigerian Electricity Regulatory Commission (NESI) with the recognition of tariff shortfalls arising from revenue under-recovery.
The commission also said that the failure of DisCos to comply with expected minimum remittance thresholds in the Order exposed NESI to systemic risk that threatened the sustainability of other parts of the value chain, and the ability to improve service delivery to consumers.
Following the breaches, the regulatory commission stated that all the DisCos must show cause in writing within 60 days from the date of receipt of the notice, detailing reasons why their respective licenses should not be cancelled in accordance of the EPSRA law.
Plan to overhaul Nigeria’s Power grid attracts investors – Siemens
The project is aimed at achieving 25,000 megawatts of electricity in the country by 2025.
German engineering giant, Siemens, said its multi-billion dollar deal to revamp Nigeria’s Power infrastructure has gained the interest of investors.
This was disclosed by the company’s Nigerian CEO, Onyeche Tifase, who also noted that Siemens aims to implement similar strategies it used in Egypt that saw electricity generation in the North African country grow by over 40%
The Backstory: Nairametrics reported last year that Nigeria had allocated the first N61 billion for its Electrification Road Map in partnership with Siemens AG. This followed a July 2019 agreement between both parties.
The Nigerian electrification project has three phases. The project is aimed at achieving 25,000 megawatts of electricity in the country by 2025.
In May, President Muhammadu Buhari directed the Ministries of Power, Finance, and the Bureau of Public Enterprise (BPE) to conclude the nation’s engagement with Siemens AG over the regular power supply.
Last month, Nigeria approved the sum of N8.64 billion as part of counterpart funding for the Presidential Power Initiative (PPI), which is also known as the Siemens Project. The PPI funding structure includes:
- 85% from a consortium of banks, guaranteed by the German government through credit insurance firm, Euler Hermes.
- 15 % of FG’s counterpart funding.
- 2–3 years moratorium.
- 10–12 years repayment, at concessionary interest rates.
Tifase said that the project would upgrade existing power substations and install distribution lines and transformers to Nigeria’s electrical grid, adding that the project has made potential foreign investors see investment opportunities in Africa’s largest economy.
“Our ability to deliver all the automation of distribution, transmission and generation has boosted investors’ confidence.
“Oil and gas companies that had stepped back because of a lack of benefits are reconsidering,” she said.
Nigeria losses 2% of its annual GDP to power failure. Siemens plans to upgrade Nigeria’s transmission capacity to 7,000 megawatts in the first phase of the project as the World Bank also approved a $750 million loan in June to finance efficient metering of Nigeria’s grid.
Apart from the World Bank, the project is also financed by German banks including Deutsche Bank and Commerz bank with supervision from the German government.
Jumia confirms Covid-19 lockdowns did not help e-commerce revenues
Africa’s leading e-commerce firm Jumia released its second-quarter earnings on Wednesday showing it incurred a loss of Eur 37.6 million (N17.1 billion) in the second quarter of 2020 despite the rampaging effect of Covid-19.
According to Jumia, it did not experience any “meaningful change in consumer behavior” following the Covid-19 induced shutdown.
Contemporary views suggest e-commerce firms were one of the winners in the ensuing Covid-19 pandemic induced lockdown. However, the company reported significant challenges to its operations. Here is how Jumia responded;
- In Nigeria and South Africa, we faced significant disruption as a result of movement restriction.
- This disruption persisted during the early part of the second quarter of 2020, before gradually easing towards the later part of the quarter.
- Our food delivery business, Jumia Food, which was negatively impacted by restaurant shutdowns starting mid-March, resumed normal operations in late May / early June in most cities where we operate the service.
- Across the majority of our addressable market, we experienced no meaningful change in consumer behavior, aside from increased demand for essential and every-day products and reduced appetite for higher ticket size, discretionary purchases.
- The nature of lockdown measures put in place consisted mostly of localized restrictions of movement and partial curfews rather than nationwide lockdowns, with the former leading to less drastic changes in consumer lifestyles and behavior than all-encompassing, nationwide lockdowns.
What this means
Jumia’s revelations confirm fears that the Covid-19 lockdowns may not have positively impacted on the e-commerce sector whose business model requires that their gross merchandise volumes increase for them to improve margins.
However, by confirming that Nigerians focussed more on essentials, the negative impact of the Covid-19 appears to be more severe than even expected.
Nigerians are perhaps also cautious about their spending, avoiding expenditures that do not speak to their immediate need such as food supplies, medicare, and utilities.
Jumia reports N17.1 billion loss in Q2 as COVID-19 fail to boost revenue
Jumia reported a loss after tax of Eur 37.6 million (N17 billion) in the second quarter of 2020.
One of Africa’s leading e-commerce companies, Jumia reported a loss after tax of Eur 37.6 million (N17 billion) in the second quarter of 2020 despite the rampaging effect of COVID-19.
E-commerce firms were expected to be one of the major beneficiaries of COVID-19 pandemic as consumers gravitated to online orders to meet essential needs.
The losses were a much improvement from the Eur 66.7 million loss reported in the same period in 2019 as Jumia strives to dig itself out of massive loss hole. However, the losses wiped out Jumia’s revenue of Eur 34.9 million reported in the quarter under review.
On Customer Acquisition, Jumia reports it now has 6.8 million active customers as in the second quarter of 2020 up 40% when compared to the same quarter in 2019. Orders also reached 6.8 million up 8%, while GMV was €228.3 million, down 13% on a year-over-year basis.
Jumia explained the results as follows;
“We have made significant progress on our path to profitability in the second quarter of 2020, with Operating loss decreasing 44% year-over-year to €37.6 million. This was achieved thanks to an all-time high Gross Profit after Fulfillment expense of €6.0 million and record levels of marketing efficiency with Sales & Advertising expense decreasing by 51% year-over-year,” Jeremy Hodara and Sacha Poignonnec, Co-Chief Executive Officers of Jumia.
He continued, “We are navigating these uncertain times of COVID-19 pandemic with strong financial discipline and operational agility which positions us to emerge from this crisis stronger and even more relevant to our consumers, sellers, and communities.”
A cursory look at the results reveals Jumia reported revenue of Eur 34.9 million compared to Eur 38.8 million same period in 2019. Whilst Jumia reported significant revenue growth in key Platform revenue segments such as Commissions, Fulfillment, Marketing & Advertising it lost big in its First Party revenue. The First Party revenue are closed sales leads generated when customers directly visit an e-commerce website or call or contact them directly to make purchases.
Jumia reported that First Party revenue fell a whopping 49.1% YoY to Eur 11 million compared to Eur 21.6 million the same period in 2019. Despite the drop in revenues, Jumia experienced a growth in gross profit as a change in its business model helped reduce the direct cost of sales. In the quarter under review, gross profit rose 38.2% to Eur 23.3 million.
The company claims cost-cutting was driven by cost efficiency initiatives. For example, it explains that it “changed the volume pricing model from a price per successfully delivered package to a price per successful stop which led to a c. 8% reduction in cost per order for a given route. Our third party logistics partners are now paid per successful stop at customer address, regardless of the number of packages included in the delivery”.
It also claimed it adopted a mother-daughter warehouse system which brings warehouses stocked with “essential products” closer to customers helping reduce last-mile delivery cost.
Jumia’s Ebitda closed at Eur 32.9 million compared to Eur 44.4 million the same period last year representing a 25.9% drop in Ebitda losses. Jumia’s accumulated losses are now a staggering Eur 1.17 billion while its net assets are just Eur 108.4 million. Jumia’s loans total about Eur 10 billion.