Economy
FG has not Cancelled Power Purchase Agreements—Adeosun
By Modupe Gbadeyanka
Minister of Finance, Mrs Kemi Adeosun, has reacted to media reports claiming that the Power Purchase Agreements (PPAs) signed by Federal Government with Project Developers in the power sector has been cancelled.
In a statement issued on Friday, the Minister said there was no iota of truth in the “bogus and unverified report.”
She explained that the role of negotiating with Project Developers and signing PPAs is domiciled with the Nigerian Bulk Electricity Trading (NBET) Plc and not the Federal Ministry of Finance.
“However, as the primary obligor of all forms of guarantees issued by all governments of the federation and their agencies, Federal Ministry of Finance through the Debt Management Office (DMO), must estimate the size of obligation that it is willing and able to accommodate in relation to the power sector.
“Furthermore, the Ministry is required to evaluate the country’s repayment capacity for current and contingent debt obligations as part of its Debt Sustainability Analysis (DSA), which is a key requirement for sound Public Debt Management practice.
“These liabilities have wider implications for the country’s debt and overall fiscal position in the medium to long-term,” the Minister explained further.
She further said, “Guarantees constitute a contingent liability and it is important to note that increasingly, for a number Power Purchase Agreements being signed in the Power Sector, in recent times, Federal Government is required to provide and sign a Partial Risk Guarantee (PRG) as well as a Put Call Option Agreement (PCOA).
“Guarantees by themselves do not constitute a risk. However, where guarantees are expected to be the primary means of ensuring ongoing contractual payments, they constitute a huge risk to the fiscal sustainability of the Federal Government.
“Guarantees are issued to provide extra comfort between contractual counterparties and should be issued based on the existence of steady/regular cash flows that underpin the contracts.
“Besides, a sovereign default has the consequent effect of increasing Nigeria’s credit risk and cost of borrowing in the International Capital Markets (ICM). It would be recalled that the Federal Government had recently and successfully raised Eurobonds of $5 billion in the ICM at favourable yields. These proceeds are being invested in the much needed infrastructure (Road, Rail, Power, etc). A default would therefore, have a detrimental effect on the development of the country.”
“In view of the above, Federal Ministry of Finance initiated an inter-ministerial meeting with all representatives from DMO, Federal Ministry of Power, Works and Housing, the Nigerian Bulk Electricity Trading Plc and Bureau of Public Enterprises where the following decisions were reached with regards to the Independent Power Plants requiring PCOAs which was communicated to NBET on the 26th of July, 2017:
“i. The Federal Government will bear Foreign exchange rate risk and make termination payments in “ii. NBET is required to work within a contingent liability exposure limit of US$10 billion (US$5bn for PCOAs and US$5bn for NIPPs). It is expected that NBET would negotiate with project developers to ensure that Nigerians are getting the best quality of service within costs aligned to global standards. “The Federal Ministry of Finance is focused on achieving market sustainability in the long-term and requires that NBET has a comprehensive plan to manage these exposures to avoid a drawdown on the PRGs.
“It is imperative that Federal Ministry of Power, Works and Housing; Nigerian Electricity Regulatory Commission (NERC); and NBET must ensure that meters are rolled out to improve billing accuracy and also improve DISCO collections in order to increase cash flows to the power sector value chain.
“If the market cannot pay for power distributed, the situation will remain unsustainable. It is unhealthy for Federal Government to build an entire sector based on Sovereign Guarantees without addressing challenges inhibiting financial sustainability across the value chain.
“It should also be noted that no Multilateral Agency would continue to issue guarantees where it is clear that the requirement for steady cash flows within the sector to meet regular payment obligations does not exist.”
The Minister also pointed out that Federal Government is willing to accept investments that are accretive in value to the Nigerian economy on a holistic basis.
By Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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