11 Aug

Daily Watch – Nigeria in danger of 0MW, New tax policy on the way

  • GenCos have threatened to shut down over ₦156 billion in debts owed them by consumers, especially government agencies. Investors that bought the six power generating companies unbundled from the PHCN said they would shut down their power plants if the deb was not paid. They also said banks were recalling loans advanced to them. In a joint statement, the GenCos said they will shut down power supplies unless the government pays longstanding bills it owes them and improves gas supplies. The GenCos, which include Transcorp’s power and Forte Oil’s power, said they struggled to repair their networks because imports of spare parts had become too expensive due to naira devaluation. “In 2013, when we bought the power plants, exchange rate was ₦150 per dollar. Today it is ₦310 per dollar. How can we repair, equip, acquire new turbines at this rate of ₦310 per dollar and yet still operate with an old tariff? A shutdown is, indeed, imminent,” they said. If the companies make good their threat, most industries and residential homes will be in darkness except for those that rely on expensive diesel generators.
  • The FG has started a review of the National Tax Policy. Minister of Finance, Kemi Adeosun, said that the government was determined to simplify the country’s tax code for effective revenue generation. She explained that one of the areas of the tax code and laws in need of review was the simplification of the processes as well as the reduction of the tax burden on small businesses. Adeosun said Nigeria could no longer continue to rely on oil revenue following the volatility in the global market, hence the need to look at effective ways of generating more revenue from taxes.
  • Nigeria’s gas exports have suffered a setback as Shell has declared force majeure on gas supply to NLNG’s export facility on Bonny Island. Shell spokesman, Precious Okolobo, told the Punch that the force majeure was declared on August 8 following a leak on the Eastern Gas Gathering System pipeline through which Shell supplies the bulk of its gas to the NLNG. The Punch reported that some of the 1.7 billion standard cubic feet of gas per day from facilities associated with the pipeline would be shut-in as a result of the force majeure, meaning less exports for the NLNG and lower revenue for the government. This is Shell’s second force majeure in August as the company declared force majeure on gas supplies to the NLNG following a leak along the EGGS-1 on August 4.
  • Textile manufacturers have asked the FG to stop selling gas to local industries in American dollars. According to them, the payment of the gas tariff in USD has made the commodity unaffordable to many businesses. The Nigerian Textile Manufacturers Association insisted that the gas being supplied to the local industries was costlier than what the commodity was selling for in the international market. The Federal Ministry of Petroleum Resources and the Ministry of Power, Works and Housing on several occasions had made it clear that the cost of gas to the power plants was lower than what industrial gas users were paying.