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 Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed higher by 1.41 per cent on Friday, May 15, supported by four securities on the platform.
During the session, FrieslandCampina Wamco Plc added N14.24 to its share price to sell for N159.00 per unit, in contrast to the previous day’s N144.76 per unit.
Further, Central Securities and Clearing System (CSCS) Plc appreciated by N1.34 to N72.34 per share from N71.00 per share, Geo-Fluids Plc improved its price by 4 Kobo to N2.94 per unit from N2.90 per unit, and Industrial and General Insurance (IGI) Plc gained 1 Kobo to trade at 61 Kobo per share compared with Thursday’s closing price of 60 Kobo per share.
As a result, the NASD Unlisted Security Index (NSI) rose by 58.20 points to 4,188.41 points from 4,130.21 points, and the market capitalisation soared by N34.82 billion to N2.506 trillion from N2.471 trillion on Thursday.
During the session, the volume of trades went up by 180.8 per cent to 1.2 million units from 417,349 units, and the value of transactions increased by 29.8 per cent to N29.8 million from N23.2 million, while the number of deals fell by 22.6 per cent to 24 deals from 31 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 60.8 million units exchanged for N4.1 billion, and Okitipupa Plc with 27.9 million units valued at N1.9 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
By Dipo Olowookere
The bears overpowered the Nigerian Exchange (NGX) Limited on Friday, sinking it further by 0.76 per cent when the closing gong was struck by 4 pm.
The nation’s flagship equity market was under selling pressure during the session, as investors booked profits after the shares witnessed price appreciation in the past trading sessions.
The energy sector was the most impacted, as it shed 4.43 per cent. The consumer goods index declined by 0.90 per cent, the banking counter decreased by 0.15 per cent, and the industrial goods sector lost 0.08 per cent, while the insurance counter gained 2.42 per cent, which was not enough to salvage the situation.
Consequently, the All-Share Index (ASI) contracted by 1,912.19 points to 250,330.92 points from 252,243.11 points, and the market capitalisation moderated by 1.225 trillion to N160.444 trillion from N161.669 trillion.
Zichis was the worst-performing stock for the session after it gave up 9.97 per cent to close at N29.43, FTN Cocoa slipped by 9.95 per cent to N8.96, The Initiates slumped by 9.90 per cent to N32.30, LivingTrust Mortgage Bank tumbled by 9.88 per cent to N3.83, and International Energy Insurance dropped 9.71 per cent to trade at N2.79.
The best-performing stock was ABC Transport, which grew by 10.00 per cent to N6.27. May and Baker also appreciated by 10.00 per cent to N47.30, SCOA Nigeria surged by 9.98 per cent to N33.05, Trans-Nationwide Express expanded by 9.97 per cent to N7.06, and DAAR Communications jumped 9.76 per cent to N2.25.
Yesterday, investors traded 1.1 billion shares worth N44.3 billion in 65,744 deals compared with the 1.0 billion shares valued at N41.6 billion transacted in 74,822 deals a day earlier. This indicated a dip in the number of deals by 12.13 per cent, and a rise in the trading volume and value by 10.00 per cent and 6.49 per cent, respectively.
Chams was the busiest equity for the day, with 328.5 million units sold for N1.1 billion. UBA traded 61.6 million units worth N2.7 billion, First Holdco transacted 58.7 million units valued at N4.2 billion, Secure Electronic Technology exchanged 51.9 million units worth N45.0 million, and Access Holdings traded 51.8 million units valued at N1.3 billion.
By Adedapo Adesanya
The last trading session of the week at the Nigerian Autonomous Foreign Exchange Market (NAFEX) ended on a negative note for the Naira on Friday, May 15, as it lost N15 Kobo or 0.1 per cent against the Dollar to trade at N1,371.04/$1 compared with the previous day’s N1,370.89/$1.
However, it further appreciated against the Pound Sterling in the same market segment yesterday by N20.77 to close at N1,830.61/£1 versus Thursday’s value of N1,851.38/£1, and gained N7.91 against the Euro to settle at N1,595.07/€1 versus N1,602.98/€1.
At the GTBank FX desk, the Naira lost N2 against the US Dollar during the session to sell at N1,383/$1 compared with the preceding session’s N1,381/$1, and at the black market, it remained unchanged at N1,385/$1.
The Naira is forecast to be broadly stable, supported by Dollar sales by the Central Bank of Nigeria (CBN) amid steady, higher oil receipts, with the market settling into a balance.
Policy direction is also expected to give the market some boost as the CBN said the new edition of the FX market guidelines will deepen liquidity, improve transparency and strengthen confidence in the country’s foreign exchange market.
According to the Governor of the CBN, Mr Yemi Cardoso, the update is due to changing global economic realities, domestic reforms and the need for a more coherent and forward-looking regulatory framework. According to him, the last edition of the FX manual was issued in 2018, making the latest review both timely and necessary.
Meanwhile, the cryptocurrency market plunged into the red zone as rising bond yields hit risk assets across markets, while traders are increasingly betting the Federal Reserve may need to raise rates again. Rising energy prices and resurging inflation could force central banks back into tightening mode.
Cardano (ADA) shrank by 4.4 per cent to $0.2557, Dogecoin (DOGE) slid by 3.7 per cent to $0.1104, Ripple (XRP) depreciated by 3.5 per cent to $1.41, Solana (SOL) crashed by 3.5 per cent to $87.81, and Binance Coin (BNB) slumped by 3.4 per cent to $659.64.
Further, Bitcoin (BTC) declined by 2.6 per cent to $78,547.49, Ethereum (ETH) lost 2.1 per cent to quote at $2,209.19, and TRON (TRX) tumbled by 0.7 per cent to $0.3509, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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