12 Jul

Daily Watch – No more borrowing, GenCos want higher power tariffs

  • Nigeria must not borrow more to fund its budget and should instead raise the money it needs by other means, the finance minister said on Tuesday, calling into question planned foreign loans of $2 billion from lenders like the World Bank. Nigeria had planned to borrow extensively internationally to fund a record budget, but plans for lenders like the World Bank and African Development Bank to loan at least $2 billion have been stalled for over a year as international organisations’ frustrations mounted at the country’s refusal to impose key fiscal reforms such as allowing its foreign exchange rate to float freely. Finance Minister Kemi Adeosun’s comments, made while speaking at a business forum in Abuja suggest that Nigeria will no longer seek such loans or an additional $1.5 billion it had planned to raise from international debt markets. “We cannot borrow any more, we just have to generate funds domestically enough to fund our budget. Mobilise revenue to fund the necessary budget increase,” she said. In May, the head of the budget office said the country has a shortfall of $7.5 billion for its 2017 budget expenditure and said that would be addressed with $3.5 billion from the aforementioned loans and debt. The government also planned to raise $4 billion from the local debt market, he said at the time.
  • GenCos are calling for an increase in electricity tariffs because of high business costs. Ismaila Funtua, vice chairman, Mainstream Energy Solution, said the GenCos were asking the government to stop subsidising electricity and “let those who can pay for it do so”. He also said the GenCos operatives had asked to meet with Acting President Yemi Osinbajo alongside key government officials to sort out constraints in their business. “Whether government likes it or not, they have to review the tariff of power in this country,” Funtua said. On the calls for the review of power privatisation in the country, Funtua said pending questions must be answered before such calls would be addressed. Kola Adesina, managing director of Egbin Power, also called for an increase in electricity tariff, saying “the current structures on ground “are not business friendly since electricity is not political but business inclined”.
  • Emerging Markets Telecommunication Services Ltd. (EMTS), trading as Etisalat Nigeria, says its Nigerian arm is still the soul of its business. The company said it is aware of recent news reports regarding Etisalat Group’s withdrawal of the right to the continued use of the Etisalat brand in Nigeria by EMTS, stating that it “still has a valid and subsisting agreement with the Etisalat Group, which entitles EMTS to use the Etisalat brand, notwithstanding the recent changes within the Company”. Ibrahim Dikko, Etisalat Nigeria vice-president of corporate affairs said, “discussions are ongoing between EMTS and Etisalat Group pertaining to the continued use of the brand, and EMTS will issue a formal statement once discussions are concluded. The final outcome of the use of the brand in no way affects the operations of the business as our full range of services remain available to our customers.”
  • The National Insurance Commission (NAICOM) which is the regulator that supervises operators in the insurance industry, has queried the audited results of two insurance firms. NAICOM is legally required to approve the audited accounts of all insurance companies before they are published on the NSE. In its review of audited results, it approved the financial statements of 39 firms, is currently reviewing the statements of 8 firms including the Nigerian Agricultural Insurance Corporation, Capital Express, Equity Assurance, Universal Insurance, UNIC Insurance and Saham Insurance and two firms KBL Insurance and Nigeria Reinsurance Corporation have been issued queries regarding their financial statements. The NSE had last week suspended 17 companies from trading due to the non-submission of their financial statements. About seven of those companies were insurance firms. A delay in approval by NAICOM means the affected listed firms will end up paying fines to both regulators. The insurance firms also risk a suspension of their operating licence if the issues surrounding their financial statements are deemed ‘critical.’