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FG owes DisCos over N500 billion in electricity Subsidy – PwC 

The Federal Government owes the 11 DisCos in Nigeria over N500 billion in what is described as tariff shortfall from electricity subsidy.

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FG owes DisCos over N500 billion to electricity Subsidy - PwC 

The Federal Government owes the 11 Electricity Distribution Companies (DisCos) in Nigeria over N500 billion in what is described as tariff shortfall from electricity subsidy. This is disclosed in a recently published white paper by PwC titled, ‘Solving the liquidity crunch in the Nigeria Power Sector’.

According to the report by PwC, the electricity subsidy payment being owed by the FG to the power distribution companies is expected to rise to N522 billion in 2019, a 36% increase relative to the N384 billion that was owed in 2018. The debt has been soaring over the years, climbing to N235 billion in 2016, from N165 billion in 2015.

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Electricity Subsidy

Essentially, tariff shortfall is the difference between the end-user cost-reflective tariff and the end-user allowed tariff (actual tariff) DicCos currently charge their consumers. It is money due to DisCos from customers.

[READ MORE: Discos to invest N935 billion in 5 years amidst recapitalisation calls]

Meanwhile, the shortfall is to be paid by the Federal Government, via the Power Sector Recovery Plan (PSRP) as part of the electricity subsidy.

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In 2018 only, the tariff shortfall recorded by the 11 DisCos amounted to N384 billion. According to the PwC report, this was due to the fact that electricity consumers were not charged the cost-reflective tariffs.

FG owes DisCos over N500 billion to electricity Subsidy - PwC 

DisCos 6-year loss

While Nigeria’s power sector faces several challenges, electricity distribution companies in Nigeria have steadily reported losses since their emergence in 2013. According to PwC report, there has been a steady growth in the amount of loss reported. In 2017, the total loss reported by DisCos stood at N417 billion.

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As at 2017, Abuja and Ikeja Electric were the two most indebted power distribution companies in Nigeria. Also, since inception in 2013, electricity distribution companies in Nigeria have grown their long term indebtedness. Based on available financial reports, a sum of N98.1 billion is owed by 8 Discos with Ibadan Distribution Company recording the highest borrowings as at 2018.

Specifically, a total of N661.6 billion worth of electricity was billed by DisCos in 2018 but N437.9 billion was only received. This means only 66% of electricity billed was collected in revenue.

FG’s Intervention

It was disclosed that the challenges facing the power sector, range from low collection, non-cost reflective tariffs, and distribution losses, amongst others, hence, DisCos are unable to meet their obligations to NBET and this, in turn, spirals to other players in the power value chain (GENCOs, TCN, gas companies, banks etc.).

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According to the PwC report, the liquidity crisis, which is the most critical challenge of the sector, necessitated the government’s intervention on three occasions to avoid total collapse of the sector.

[READ ALSO: FG may withdraw licenses of Abuja, 7 other Discos in 60 days]

Also according to the report, the Federal Government approved a loan of N213 billion for DisCos in 2014; the Federal Executive Council approved N701 billion in 2017, while FG also signed the release of N600 billion for the power sector which was reportedly meant for shortfall in the payment of monthly invoices by key stakeholders in the sector.

As earlier published on Nairametrics, the PwC recommended that the possible solution to the problem of liquidity crunch facing the DisCos was to start supplying 50% of distributable electricity to Nigerian companies. According to the report, this should be done provided the companies are willing to pay N80 per kilowatt while the remaining 50% can then be shared among residential consumers.

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Patricia

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Economy & Politics

Over 20% of N-Power beneficiaries are now business owners – FG

The Minister emphasized the President’s vision of lifting 100 million Nigerians out of poverty.

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The Minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Umar Farouq, has said that about 109,823 beneficiaries of the N-Power programme now have their own businesses.

This represents about 22% of the 500,000 Nigerians that have benefited from this programme since its inception.

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This was disclosed in a statement by the Minister’s Special Assistant on Strategic Communications, Mrs Halima Oyelade on Saturday, July 4, 2020. She said that the beneficiaries of Batch A and B of N-Power have established businesses in their communities.

The Minister in the statement said, “Statistics like this gives me joy and once again, I want to say congratulations; I look forward to hearing amazing testimonies and meeting beneficiaries of this programme who will be doing great things in the future”.

She emphasized President Muhammadu Buhari’s vision of lifting 100 million Nigerians out of poverty in the next 10 years by creating opportunities that would improve the productivity of Nigerian youths for entrepreneurship or employment.

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Going further the minister said, “Thus, the need to find ways to engage them is of utmost importance. However, the commencement of the enrolment of Batch C was predicated on the need to give more Nigerian youths the opportunity to benefit. This is because, keeping only 500,000 beneficiaries for four years defeats the purpose of Mr President’s vision, hence the need to scale up and was in no way meant to be punitive.”

While acknowledging the beneficiaries’ contributions, Farouq said, ‘’You are our model N-Power beneficiaries. Please avail yourselves of all opportunities provided by government like interest-free loans and leverage on those opportunities while using N-Power as a stepping stone”.

The minister said the ministry is working at resolving some of the challenges facing the programme which include delays in the payment of stipends, beneficiaries not showing up at their places of primary assignments and people accessing the programme while gainfully employed elsewhere.

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The minister also assured beneficiaries that outstanding payments would be made and transition plans were ongoing and would be duly communicated to them on their platform.

Some of the beneficiaries of the programme gave good testimonies about the impact of the programme in their lives and all expressed their gratitude to the Federal Government for the opportunity.

Nairametrics has reported the opening of application portal for batch C of the programme with effect from 11.45 pm on June 26, 2020. There have been over 3 million applicants that have shown interest in batch C of the programme in about a week.

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Patricia
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Corporate Press Releases

Meristem features Nike Okundaye in Campaign titled “The Journey”, highlights the importance for partners

Meristem taps into Okundaye’s creative energy, highlighting the shared story of growth and collaboration.

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It has been a long journey for financial services provider, Meristem Nigeria, having started out as a boutique stockbroking firm over 16 years ago and morphing into a capital market conglomerate offering an array of diversified service and product offerings. The tale is similar for the art and culture doyen, Nike Okundaye-Davies whose humble beginning in traditional weaving and dying practice annealed her to the art world and art lovers.

At a graceful age of 70, she has achieved over 102 solo art exhibitions, 36 group art exhibitions, a permanent display of two of her works in the Smithsonian National Museum of African Art, a Harvard recognition and many other global acclaims. With four (4) art galleries spread across the country, and the Lagos center being the biggest art gallery in West Africa, she once told a Forbes journalist that her dreams are driven by careful financial planning as she reinvests at least two-thirds of her income in her business and art centers.

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Meristem taps into her creative energy in this campaign, highlighting the shared story of growth and collaboration for both institutions, and the need to onboard the right partners to achieve long term financial goals and investment security.

Meristem, a capital market conglomerate and diversified financial services provider offering stockbroking, wealth management, asset management, trustee services and financial advisory. Over the past 16 years, Meristem has been consistent in value creation and innovation within the capital market space. The Nigerian stock exchange awarded Meristem as the best digital broker of the year. In 2018 also, Meristem became the first Nigerian asset management firm to attain compliance with the Global Investment Performance Standards (GIPS) by the CFA Institute. In 2017, Meristem handled the single largest trade in the history of the Nigerian Stock Exchange.

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Around the World

Shell considers relocating its headquarters to the UK

Royal Dutch Shell has consistently pushed for the Dutch Government to stop taxes on dividends.

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GLOBAL GAS vs SHELL: COURT SETS ASIDE AWARD OVER BREACH OF CONTRACT, Investors, shareholders shocked as Shell reduces dividend

Oil and gas giant, the Royal Dutch Shell, is considering moving its corporate headquarters from The Netherlands to Britain. This could be a move against the implementation of dividend tax in The Netherlands.

The move was disclosed by the oil company’s Chief Executive Officer, Ben Van Beurden, during an interview with a Dutch newspaper on Saturday, July 4, 2020. According to him, the oil giant is not ruling out relocating its headquarters from the Netherlands to Britain. He said:

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You always need to keep thinking. Nothing is permanent and of course we will look at the business climate. But moving your headquarters is not a trivial measure. You cannot think too lightly about that.”

Further confirming the Chief Executive Officer’s comment, a Shell spokesman told Reuters that the oil giant is looking at ways to simplify its dual structure, as it had been doing for many years.

Royal Dutch Shell has consistently pushed for the Dutch Government to stop the tax on dividend paid to shareholders, as this makes financing dividend, share buy-backs and acquisition a lot more difficult.

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An earlier attempt by the Dutch Government to stop the dividend tax as an incentive to convince Unilever to unify its dual structure in Rotterdam, was met with an outcry by the public, who see that as a gift to rich foreigners.

It can be recalled that Shell had announced a few days ago that it might likely write down between $15 billion-$22 billion in post impairment charges for the second quarter of 2020. The impairment, which is its largest since the merger with Shell Transport and Trading Company Ltd in 2005, shows the huge adverse impact that the coronavirus pandemic has had on the oil giant’s businesses.

Also, in a move that shocked investors, Shell for the first time since the Second World War, cut down the dividend that it paid to its shareholders by two-thirds due to the negative impact of the pandemic. The decision came as a surprise to many including shareholders of the oil company which is by far the biggest payer of dividend in the FTSE 100.

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Patricia
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