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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.

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Plan to overhaul Nigeria’s Power grid attracts investors - Siemens

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.

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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.

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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.

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Energy

New PIB amends royalties by oil firms as Sylva clarifies position on scrapping of NNPC

The Minister has clarified that the new PIB seeks to commercialize the NNPC rather than scrap it.

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New PIB amends royalties by oil firms as Sylva clarifies position on scrapping of NNPC, autogas, FG to establish petroleum depot, oil and gas logistic centre in Akwa Ibom

The long-awaited new Petroleum Industry Bill (PIB), which was just submitted by President Muhammadu Buhari to the National Assembly, has taken steps to amend changes to deep water royalties made last year.

This is as the Minister of State for Petroleum Resources, Timipre Sylva, has clarified that the new PIB seeks to commercialize the Nigerian National Petroleum Corporation (NNPC) rather than scrap it.

According to Reuters, while confirming the receipt of the Petroleum Industry Bill (PIB) from the President, the Senate President, Ahmed Lawan, said that it would be officially presented on the floor of the 2 chambers of the National Assembly on Tuesday and would get quick consideration.

READ: Senate urges FG to diversify from crude oil to natural gas production 

In addition to the earlier reported creation of a new company, Nigerian National Petroleum Company Limited, to take over the assets and liabilities of NNPC and the establishment of some new regulatory bodies, a section of the bill proposes an amendment to controversial changes to deep offshore royalties made late last year. This involves reducing the royalty that oil companies pay the Federal Government for offshore fields producing less than 15,000 barrels per day from 10% to 7.5%.

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It would change a price-based royalty too so that it kicked in when oil prices climbed above $50 per barrel, rather than the initial $35.

It would also codify in law that companies cannot deduct gas flaring penalties from taxes, a practice that was the subject of a court case.

READ: FG projects $2 billion annual revenue from Escravos Gas project

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Sylva made the disclosure during an interaction with journalists at the National Assembly complex after an interactive session with the leadership of the assembly.

Sylva said, “We have heard so much noise about NNPC being scrapped but that is not being envisaged by the bill at all. NNPC will not be scrapped but commercialized in line with deregulation move being made across all the streams in the sector comprising of upstream, downstream and midstream. We have said that NNPC will be commercialized.

“But if you are talking about transforming the industry, the only new thing that we are introducing is the development of the midstream, that is the pipeline sector. So we have provided robustly for the growth of the midstream sector. Through commercialization, the required competitiveness in the sector will be achieved.

READ: NNPC signs gas development and commercialization deal with SEEPCO

Sylva also pointed out that the host communities would have the best deal from the bill.

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Nairametrics had earlier reported the scrapping of the Petroleum Product Pricing Regulatory Agency (PPPRA) and the Petroleum Equalization Fund (PEF) in the proposed new bill, in addition to the creation of a new entity, NNPC Ltd.

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The Federal Government is expected to pay cash for shares of the company, which would operate as a commercial entity without access to state funds.

READ: Board room squabble tears HealthPlus apart

The changes could make it easier for the struggling company to raise funds. However, the bill does not require the government to sell shares in the company and, unlike previous reform proposals, does not set a deadline for privatization to be completed.

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Energy

President Buhari to scrap NNPC, PPPRA as he submits new PIB to National Assembly

The President has recommended the scrapping of the NNPC and PPPRA in the new PIB submitted to the National Assembly.

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President Buhari to scrap NNPC, PPPRA as he submits new PIB to National Assembly, Buhari says there is no provision for fuel subsidy in revised 2020 budget, President Muhammadu Buhari to address Nigerians on Monday, receives update and recommendations from PTF

President Muhammadu Buhari has proposed the scrapping of the Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Pricing Regulatory Agency (PPPRA) in the new long-awaited Petroleum Industry Bill 2020 which has just been transmitted to the National Assembly.

According to a report from Punch, the president has proposed the creation of the Nigerian National Petroleum Company Limited that will inherit the assets and liabilities of the NNPC to be determined the Minister of Petroleum and the Minister of Finance as well as the establishment of Nigerian Upstream Regulatory Commission and The Nigerian Midstream and Downstream Petroleum Regulatory Authority.

READ: Nigeria is exploring getting IOCs to refund $21 billion 

The bill proposes that the petroleum minister shall within 6 months from the commencement of the Act, incorporate a limited liability company called the Nigerian National Petroleum Company Limited (NNPC Limited) under the Companies and Allied Matters Act.

Sections of the bill state, “The Minister (of Petroleum) and the Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited.

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“Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection 1 of this section shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government.’’

READ: PIB and its unsurmountable obstacles

“NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government.”

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 “The minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares.’’

It also states that the “ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.”

READ ALSO: Oil: International oil companies scale down on Nigeria operations   

The bill also states that the proposed Nigerian Upstream Regulatory Commission will be responsible for the technical and commercial regulation of upstream petroleum operations while the new Nigerian Midstream and Downstream Petroleum Regulatory Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.

The new bill technically scraps the PPPRA with the creation of the new agencies that will now carry out the PPPRA’s functions.

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Nairametrics had reported last week that President Buhari was expected to submit the Petroleum Industry Bill (PIB) to the National Assembly early this week following his approval.

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READ: NNPC, Chinese firm conclude plans to commence AKK project 

The PIB which is an oil reform bill has been in the works for about 20 years starting with the administration of former President Olusegun Obasanjo and is key to the repositioning of Nigeria’s Oil and Gas Industry under its post-COVID-19 agenda as the main laws governing oil and gas exploration have not been fully updated since the 1960s due to some contentious issues like taxes, payments to local communities, terms and revenue sharing within Nigeria.

Successive administrations have tried without success to pass the bill that is supposed to reform the oil and gas sector.

READ: Covid-19: Timeline of every pronouncement made by Nigeria to support the economy

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), had disclosed that the delay and non-passage of the bill have made international investors start losing confidence in the country’s oil and gas industry.

During President Buhari’s first term, the Eighth NASS split the bill into four parts namely the Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill — in a bid to fast-track its passage into law.

However, after the passage of the PIGB by the National Assembly, the president declined to sign the bill because of the retention of 10% of the revenue generated by the Petroleum Regulatory Commission which they considered too high and the whittling down of the powers of the Minister for Petroleum.

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Energy

Electricity tariff increase is suspended for 2 weeks

The FG and the Nigerian Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks.

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Minister of Labour, Ngige, says labour demand will force government to sack workers

The Federal Government and the Nigerian Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks. This was part of the agreement reached between Labour and the Government as they deliberated to avert a nationwide strike that would have grounded an already deteriorating economy.

While the strike was over two major issues, an increase in electricity charges and fuel price respectively, the decision to call off the strike was based on the suspension of the electricity bills. The following terms of reference underpinned the agreement between Labour and the Government.

Explore the Nairametrics Research Website for Economic and Financial Data 

Terms of reference for suspension of electricity increase for 2 weeks.

Terms of reference “The Terms of Reference (ToR) are as follows: To examine the justification for the new policy on cost-reflective Electricity Tariff adjustments.”

  • Both parties are to examine the justification for the new policy on cost-reflective tariff adjustment
  • To look at the different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate.
  • Examine and advise government on the issues that have hindered the deployment of the six million meters.
  • To look into the NERC Act under review with a view to expanding its representation to include organized labour.
  • The Technical sub-committee is to submit its report within two weeks.
  • During the two weeks, the DISCOs shall suspend the application of the cost-reflective electricity tariff adjustments. “The meeting also resolved that the following issues of concern to Labour should be treated as stand-alone items:
  • The 40% stake of government in the DISCO and the stake of workers to be reflected in the composition of the DISCOs Boards.
  • An all-inclusive and independent review of the power sector operations as provided in the privatization MOU to be undertaken before the end of the year 2020, with Labour represented.
  • That going forward, the moribund National Labour Advisory Council, NLAC, be inaugurated before the end of the year 2020 to institutionalize the process of tripartism and socio dialogue on socio-economic and major labour matters to forestall crisis.

READ: FG says no electricity tariff increase for poor, vulnerable Nigerians, gives conditions for increase

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What this means: The decision reached between the government and labour means the service reflective tariff regime which started on September 1, 2020, is effectively suspended. Customers are therefore no longer required to pay the service reflective tariffs and will revert to the previous MYTO tariffs of 2015.

  • By looking at the “different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate” it appears labour might be looking to recalibrating the tariffs for some Discos.
  • According to documents on the tariff order published by the NERC, some Discos have tariffs for residential customers that are as high as N62/kWh while it’s just under N54 for others.
  • Labour could also get involved in determining the veracity of the tariff bands that determines which customers pay what as electricity tariffs.

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