Daily Watch – GenCos want NBET scrapped, Blackout to persist

The Transmission Company of Nigeria has said that the total blackout experienced in most parts of the country last Wednesday and Thursday following a collapse of the power grid is expected to continue in some locations as the grid is still unstable despite efforts to have it fully restored. The grid collapse was the worst that had occurred in the past three years. There was a total blackout in Abuja and neighbouring states for several hours on Thursday following the collapse of the power grid, which led to a near zero allocation to the Abuja Electricity Distribution Company. AEDC supplies electricity to the FCT, Nasarawa, Niger and parts of Kogi state. The blackout, however, did not only happen in AEDC franchise areas, rather most parts of the country did not get power supply on Wednesday and Thursday, while many other parts did not receive power as of Friday. According to the Managing Director, TCN, Usman Mohammed, the firm cannot ascertain the stability of the grid, but it is still in the process of restoration. However, adequate investment is needed on the distribution side for a stable grid, he said.

An investigation by The Punch newspaper shows that Nigeria’s government spent about ₦3.1 trillion on non-debt recurrent expenditure out of the ₦3.96 trillion actual revenue generated between January and December 2018 to finance its budget. The 2018 budget, had a total spending of ₦9.1 trillion where the capital expenditure was put at ₦2.87 trillion, a 31.5 percent of the total expenditure, while recurrent non-debt spending was planned to cost ₦3.51 trillion in 2018. There was also a provision of ₦2.01 trillion for debt servicing, which was 21 percent of the total budget while a provision of ₦177 billion to retire maturing bond to local contractors was made by the government. The Ministry of Power, Works and Housing had the highest allocation with ₦715 billion for both recurrent and capital expenditure, Ministry of Interior got ₦577 billion while Defence was allocated ₦576 billion . Ministry of Education was allocated ₦542 billion; Health ₦356 billion; Transportation, ₦267 billion; and Agriculture ₦203 billion. Details of the performance of the budget showed that the amount spent on non-debt recurrent expenditure represents about 78.3 percent of the retained revenue of the FG. A breakdown of the non-debt recurrent spending showed that personnel cost with ₦2.09 trillion took a huge part of the N3.1 trillion. The amount spent on personnel cost represents about 67.41 per cent of recurrent expenditure. The report showed, among others, that the sum of ₦197.77 billion was spent on pension and gratuities between January and December 2018 as the sum of ₦218.8 billion was spent on overheads between January and December 2018, out of the budgeted amount of ₦246.49 billion, while service wide votes had a total spending of ₦237.6 billion allocated for that expenditure sub-head in 2018.

Power generation companies are calling for the total scrapping of the Nigeria Bulk Electricity Trading amid rising debt the government-owned firm owed the GenCos for electricity generated, sold and fed into the national grid. In March NBET owed Gencos ₦364.11 billion for the electricity services from January to October 2018. NBET buys electricity in bulk from Gencos through Power Purchase Agreements and sells through vesting contracts to the distribution companies, which then supply it to the consumers. The Executive Secretary, Association of the Gencos, Joy Ogaji, said that the bulk trader was paying GenCos far less than the invoices given to it, noting that the ₦701 billion payment assurance guarantee had ended since December. The FG had in March 2017, launched the Power Sector Recovery Programme with the major highlight being a CBN-funded payment assurance guarantee for two years to the tune of ₦701 billion. The fund, which was expected to cover the shortfall of NBET, was targeted at Gencos and gas suppliers for power power generation. NBET was set up to provide buffer to ensure 100 percent payment to GenCos for the power generated, sold and fed into the grid. Due to the inability of NBET to perform its role as a buffer provider, the GenCos, however, called for its restructuring if the FG, in its wisdom, thinks that NBET should still be in existence, otherwise it should be scrapped and the staff be shared into the different agencies, NERC and market operator.

The Nigeria Extractive Industries Transparency Initiative says that Federation Account Allocation Committee’s disbursements to the FG, states and local governments depreciated by 0.45 percent to ₦1.929 trillion between January and March 2019, from ₦1.938 trillion recorded in the same period in 2018. This was said in NEITI’s Quarterly Review of total FAAC disbursements in Q1 2019. NEITI, however, noted that the amount disbursed by FAAC in the period under review represented an improvement of 36.7 percent compared with the ₦1.411 trillion recorded in the Q1 2017. According to the agency, the reduction in the disbursements is attributed to drop in oil prices. It noted that the prices of the commodity had started its downward spiral from November 2018. It advised the three tiers of government to exercise some restraint in their expenditure profiles and continuous dependence on oil revenues to fund budgets. As a result of the dip in crude oil prices, total FAAC disbursements in the Q1 of 2019 ended the recent trend of over ₦2 trillion disbursements which lasted for three consecutive quarters of Q2 to Q4 of 2018, the agency said. From the disbursements, the FG received ₦803.18 billion in Q1 of this year, 1.18 percent lower than the ₦812.8 billion the FG received in the same period in 2018 and 46.2 percent higher than the ₦549.1 billion disbursed in the corresponding quarter of 2017. Only the ₦398.44 billion disbursed to LGs in Q1 2019 was higher by 1.28 percent when compared to ₦393.4 billion disbursed in the Q1 of 2018, and 47.8 percent higher than the amount disbursed to them in Q1 2017. NEITI also observed that this year’s budget as already presented by 35 states cannot be adequately funded even by combined net FAAC disbursements to each state in 2017 and 2018.