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Nigerians spend $14 billion on generators, fuel

It has been revealed that Nigerians spend about $14 billion on generator and fuel yearly in order to prevent their businesses from crippling.

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Ban on generators: Throwing the baby with the bath water, Nigerians spend $14 billion on generators, fuel as Senators seek ban on generator use

With power supply being one of the major business constraints in Nigeria according to the Central Bank of Nigeria (CBN), it has been revealed that Nigerians spend about $14 billion on generator and fuel yearly in order to prevent their businesses from crippling.

For years, generator has served as an alternative source of power for Nigerians, as the country experiences unstable and poor power supply. This has led to increase in generator budget for many households and businesses within the country.

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The amount spent on generator and fuel by Nigerians was revealed by the Director in charge of African Development Bank (AfDB) in Nigeria, Ebrima Faal who stated that it would have negative impact on the power sector.

The $14 billion shows an increase in spending and proves power supply in Nigeria is not getting better despite the privatisation, as Nairametrics reported last year that Nigerians spent about $12 billion fueling generators.

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[READ MORE: Ban on generators: Throwing the baby with the bath water?)

In order to improve the power sector, Nigeria privatised the power sector, leading to the creation of 11 distribution companies (Discos), but year in year out, both the government and the Discos have continued to blame each other for the poor power supply.

The increase shows businesses struggle to remain in business, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said in a report by The Nation. He said spending on generator is unavoidable even though it’s increasing cost of operation and affecting contribution to the Gross Domestic Product (GDP) of the country.

“The costs incurred to provide alternative sources of power are inevitable if industrialists are to remain in business in Nigeria. This, perhaps, is the biggest single factor impeding the growth of industrialisation.

“The issue has made our industries very uncompetitive in recent times. That is one of the reasons our industries cannot produce for export unlike their counterparts abroad. Also, our industries contribute less than 10 per cent to the country’s Gross Domestic Product (GDP.)”

According to the International Monetary Fund (IMF), lack of access to electricity and unreliable power supply are key constraints to doing business in Nigeria. The IMF estimated the annual economic loss at about $29 billion.

Senate doesn’t care: Despite the poor power supply, a bill to ban importation of generators into Nigeria passed the first reading in the Senate. The bill was sponsored by Senator Bima Muhammadu Emagi (APC Niger South).

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[READ ALSO: Ban to curtail generator importation faces strict resistance by Senate)

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Also, last year, Senator Francis Fadahunsi requested a five-year ban on generator importation. The suggestion was, however, rejected by the Senate President, Ahmed Lawan. The decision to ban generator sets was once successful in 2015 when the Federal Government banned the importation of the most commonly used type of generating set in Nigeria popularly known as “I better pass my neighbour.”

It is still puzzling as to why Nigerian Senators keep introducing bills that seek to stop the use of generators in a country with epileptic electricity supply. Even President Muhammadu Buhari’s office was projected to spend N46 million on fueling generators in 2019.

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

5 Comments

5 Comments

  1. Michael

    March 19, 2020 at 7:40 am

    The attitude and disposition of the sponsors of the bill is a testament to the sponsors gross lack of sensitivity to the plight of industries, commerce, the common man and helpless Nigerians.
    Perhaps, we take a trip to their homes to see and confirm that they don’t own or use generating sets in their homes. Then we will know whether or not to take these senators seriously.

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Financial Services

CBN grants Greenwich Trust Limited operational license for merchant banking

CBN has upscaled Greenwich Trust Limited to the status of a merchant bank.

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The Central Bank of Nigeria (CBN) has upscaled Greenwich Trust Limited and granted it, operational license for merchant banking in the country.

According to an official statement released by the firm, the entity would be known as Greenwich Merchant Bank Limited. This license allows Greenwich Merchant Bank to upscale and offer such diverse services as corporate banking, investment banking, financial advisory services, securities dealing, treasury wealth and asset management, etc., making it possible to provide increased value to stakeholders beyond its previous scope.

Recall that the minimum capital requirements for establishing a merchant bank according to Merchant Banking Licensing Regulations in 2010 are N15 billion

(READ MORE: CBN debits banks N216.1 billion for CRR compliance)

With the addition of Greenwich Merchant Bank, Nigeria now has six merchant banks. The others are; FBN Quest, Coronation Merchant Bank, DSH Merchant Bank, Nova Merchant Bank and Rand Merchant Bank.

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About Greenwich Trust Limited

Greenwich Trust Limited is an investment banking firm duly registered with relevant authorities such as the Nigerian Securities and Exchange Commission (SEC). It is a diversified firm with subsidiaries such as Asset management, GTL Properties, GTL Securities Limited, Cedar Express Limited and Meyer Plc.

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Business News

Emirates Airlines banned from operating in Nigeria

UAE’s Emirate Airline has been banned from operating in Nigeria.

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Emirates Airline has been added to the list of airlines which have been banned from operating in  Nigeria. The ban will take effect from the 21st of September.

This was announced by the Minister of Aviation, Hadi Sirika in a social media statement on Friday.

“The PTF sub committee met today with EU Ambassadors to discuss Lufthansa, Air France/KLM ban. The meeting progressed well. Emirates Airlines’s situation was reviewed & they are consequently included in the list of those not approved, with effect from Monday the 21st Sept. 2020,” Sirika stated.

This comes as the UAE government has been accused of not renewing visas of Nigerians in Dubai and also rumours of a VISA ban for Nigerians applying for visas.

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Last month, the UAE embassy in Nigeria denied there is a VISA ban on Nigerians entering the Middle Eastern country. They said: “At the onset of the COVlD-19 pandemic, the UAE took a number of precautionary measures to combat the virus’ spread, including the temporary suspension on issuing UAE visas for all nationalities as of March 17, 2020.

“After entering the recovery phase of the pandemic, the UAE eased some measures on July 7, permitting visitors from various countries to adhere to the necessary precautionary measures, including by showing negative PCR test results within 92 hours of travelling to the UAE. This includes those visiting from Nigeria.”

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Energy

CBN introduces N250 billion stimulus package for gas investment to ease pain of fuel price increase

The CBN has introduced a stimulus package to help stimulate investment in gas as an alternative to fuel.

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To test FX market, CBN pumps $50 million, CBN issues guidelines to Finance Institutions on establishment of Subsidiaries and SPVs, CBN injects $2.63 billion to defend naira in one month, CBN’s COVID-19 N50 billion targeted credit facility, CBN’s heterodox policies buoys credit growth

As part of the palliative following the sharp increase in the price in the pump price of petrol, the Central Bank of Nigeria (CBN) has introduced a N250 billion stimulus package under a National Gas Expansion Programme that it hopes will help stimulate investment in the gas value chain and spur its use in transportation as an alternative to fuel-powered cars.

Large scale projects under this intervention programme will be financed under the Power and Airlines Intervention Fund (PAIF), in line with existing guidelines regulating the PAIF, while small scale operators and retail distributors will be financed by the NIRSAL Microfinance Bank (NMFB) and/or any other Participating Financial Institution (PFI) under the Agribusiness/Small and Medium Enterprises Investment Scheme (AgSMEIS).

This initiative is to be implemented in collaboration with the Federal Ministry of Petroleum Resources.

The objectives of the facility include;

  • Improved access to finance for private sector investments in the domestic gas value chain.
  • Stimulate investments in the development of infrastructure to optimize the domestic gas resources for economic development.
  • Fast track the adoption of Compressed Natural Gas (CNG) as the fuel of choice for transportation and power generation, as well as Liquefied Petroleum Gas (LPG) as the fuel of choice for domestic cooking, transportation, and captive power.
  • Fast track the development of gas-based industries particularly petrochemical (fertilizer, methanol, etc) to support large industries such as agriculture, textile, and related industries.
  • Provide leverage for additional private sector investments in the domestic gas market.
  • Boost employment across the country.

The activities that are eligible under the intervention shall include;

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  • Establishment of gas processing plants and small scale petrochemical plants.
  • Establishment of gas cylinder manufacturing plants.
  • Establishment of L-CNG regasification modular systems
  • Establishment of autogas conversion kits or components manufacturing plants.
  • Establishment of CNG primary and secondary compression stations.
  • Establishment and manufacturing of LPG retail skid tanks and refilling equipment.
  • Development/enhancement of autogas transportation systems, conversion, and distribution infrastructure.
  • Enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets.
  • Establishment/expansion of micro-distribution outlets and service centres for LPG sales, domestic cylinder injection, and exchange and
  • Any other mid to downstream gas value chain related activity recommended by the Ministry of Petroleum Resources.

The aggregators, manufacturers, processors, wholesale distributors, and related activities shall be funded under the Power and Airline Intervention Fund (PAIF), while the Small and Medium-scale Enterprises (SMEs) and retail distributors shall be funded by NIRSAL Microfinance Bank under AgSMEIS.

For the manufacturers, processors, wholesale distributors, etc, the term loan shall be determined based on the activity and shall not exceed N10 billion per obligor. The working capital shall be a maximum of N500 million per obligor.

While for the small and medium enterprises, the term loan shall be based on the activity and shall not exceed N50 million per obligor. The working capital shall be a maximum of N5 million per obligor.

Interest Rate

The interest rate under the intervention shall be at not more than 5% per annum (all-inclusive) up to February 28, 2021, thereafter, interest on the facility shall revert to 9% per annum (all-inclusive) with effect from March 1, 2021.

Loan Tenor and Moratorium

The manufacturers, processors, wholesale distributors, will have term loans which shall have a maximum tenor of 10 years (not exceeding December 31, 2030) with a maximum of a 2-year moratorium on principal repayment only. The working capital facility of 1 year with a maximum rollover of not more than twice, subject to prior approval.

The small and medium enterprises (SMEs) and retail distributors will have term loans that shall have a maximum tenor of 5 years (not exceeding December 31, 2030) with a maximum of 2 years on principal repayment only. The working capital facility of 1 year with a maximum rollover of not more than twice and subject to prior approval.

This new initiative involves getting many vehicles to run on gas by collaborating with investors to build the required infrastructure such as pipelines and petrol stations. It is also expected to help accelerate the use of natural gas and end gas flaring.

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