20 Oct

Daily Watch – Some DISCOs declare force majeure, MSMEs face funding crunch

  • Executives of power distribution companies as well as the Association of National Electricity Distributors (ANED) confirmed that some of the Discos considered declaring force majeure because they had been incurring losses since they took over the power firms. The losses, according to them, are mainly because the current electricity tariff approved by the Nigerian Electricity Regulatory Commission is not cost-reflective. Reports say that the Vice President, Yemi Osinbajo, had to intervene in the issue, because the Discos had threatened to declare force majeure if the power regulator failed to consider a cost-reflective tariff for them. “All we want is a cost-reflective tariff. Our people should realize that we need a cost-reflective tariff or else this industry will die”, Sunday Oduntan, Executive Director of ANED said. Chief Executive Officer of Abuja Electricity Distribution Company, Neil Croucher said, “The vice president himself has given wonderful guidelines and I’m very confident that this one bump on the road will be smoothed out and the process can’t fail.”
  • Judgement in the lawsuit by the Senate President, Bukola Saraki, against the Code of Conduct Tribunal has been adjourned indefinitely at the Appeal Court in Abuja. The Registrar of the Court of Appeal gave no reason for the decision. Dr. Bukola Saraki had filed an appeal challenging the legality of his arraignment at the Code of Conduct Tribunal. This gives the CCT leeway to continue trying Saraki without any interference.
  • The Permanent Secretary, Federal Ministry of Finance, Mrs. Ana Daniel-Nwaobia, has said that the Federal Government has not taken any decision on whether to remove, or leave the fuel subsidy in place. According to her, the subject is on the front burner of debate by officials of the government. “A lot of factors would be taken into consideration before such a decision could be taken,” she said. “There are various considerations that will come into play before a decision would be reached. You have to take into consideration various issues before you remove subsidy.”
  • Funding continues to be a perennial problem for Micro, Small and Medium scale Enterprises (MSMEs) in Nigeria. According to the Nigeria Deposit Insurance Corporation, deposits mobilized by the 936 micro-finance banks (many of which cater to MSMEs) were a meagre N173.3 billion, as at the first half of the year. But for micro-finance banks to access N220 billion MSMEs fund for on-lending, launched by the federal government in 2014, they must demonstrate strong enterprise risk management capable of enhancing the eligibility criteria. “A Special Purpose Vehicle (SPV) Committee consisting of the Federal Government, CBN, NDIC and other agencies is to be created to manage the fund to be given to microfinance banks and other participating financial institutions at an interest rate of 2 per cent,” said Joshua Etopidiok Director of Special Insured Institutions Department at the NDIC.
  • Nigeria’s insurance industry will continue to expand, despite recent economic headwinds and significant structural challenges. According to Fitch, favourable factors that support the long-term development of the industry include robust demographic fundamentals, investor interest and low insurance penetration. Fitch says the sector is attractive to foreign investors because the recent naira weakness provides an affordable entry point, while the difficult operating environment may give incentive to small under-capitalised insurers to consider a sale. Due diligence would however remain a challenge to the acquisition of existing insurers, despite improvements in corporate governance.