Transitioning to a Cost Reflective regime – Positive for the economy?

Must Read

TAJBank Launches Nigeria’s 2nd Non-Interest Financial Institution (Photos)

Abuja Nigeria   December 2nd 2019, TAJBank, Nigeria’s second Non –Interest financial institution, has announced the launch of its services...

Dr. Olugbodi Clinches Brand Leadership Award

In recognition of his giant strides and outstanding performance in the Integrated Marketing Communication industry, the Executive Vice Chairman...

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...
- Advertisement -
- Advertisement -

In response to the liquidity challenges and limited profitability in the Nigerian Power Sector, the Nigerian Electricity Regulatory Commission (NERC) released the ‘2016 – 2018 Minor Review of Multi-Year Tariff Order 2015 & Minimum Remittance Order’. The policy indicates that from July 2020, consumers of power supply will face an increment of N8-N14 for every kilowatt/hour of power distributed, to fully reflect the costs and operating climate faced by the Discos.

Transitioning to a Cost Reflective regime – Positive for the economy?

For a prolonged period, the power sector has been plagued by a cash crunch within its value chain, with a ripple effect on core operators and segments. With the current tariff charged on electricity supply to end-users and the government’s inability to fund the revenue gap, the Discos are unable to fully fund the Nigerian Bulk Electricity Trading (NBET), which in turn defaults on Power Purchase Agreements (PPA) with the Gencos,
causing overall discord in the power sector value chain.

Read:  FMDQ 2018 Highlights and Outlook for 2019

However, with the recent signing of the N600bn intervention fund, the Government, through the Power Sector Recovery Plan (PSRP) intends to fund all shortfalls owed to Discos within the periods of 2015-2018, and going forward, till a cost-reflective tariff is achieved.

While this development puts a solution to the continued financial underperformance of the Discos, a number of core issues remain at play. Funding the tariff shortfall poses a challenge to the government, already encumbered with low revenue generation and cost consuming activities. Additionally, as much as the plan is to transition to a higher cost environment slowly, providing a cushion for power consumers, it still poses inflationary pressures with a trickle-down effect on the cost of production. However, investors in the sector will be looking at government posture to assess the government’s resolve to achieve a cost-reflective tariff.

Read:  Nigerian roads are not bad as people claim, says Fashola
Read:  Nivea apologizes for advert branded 'racist'

 

United Capital Plc Research (UCR)

- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

AFDB approves $124.2M loan for water sector reforms in Akure to improve access to safe drinking water & sanitation

The project is set to address bottlenecks in critical water supply services to households in the densely populated project...

The Museum of Art reopens in Hong Kong with installations by Goppion

Goppion engineered, manufactured and installed the conservation display cases for the Chinese Antiquities Gallery and Fine Art Gallery HONG KONG, CHINA - Media OutReach - 13 December...

VinAI Announces Scientific Research at the World’s No.1 Conference on Artificial Intelligence – NeurIPS 2019

HANOI, VIETNAM - Media OutReach - 13 December 2019 - VinAI Research (directly under Vingroup) has just announced the first two scientific research results...

Global 5G subscribers to reach 12.9 Million this year, 1.3 billion in 2023 – Report

Global 5G subscribers are set to rise rapidly from 4 million at the end of Q3 to 12.9 million by the end of the...

More Articles Like This