NERC to Grant States Approval as Eligible Customers, Says Fashola

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Chineme Okafor

The Minister of Power, Works, and Housing, Mr. Babatunde Fashola, has said that state governments could be given approval to apply as eligible customers in the new regulation that allows for large power consumers to be supplied directly by electricity generation companies (Gencos).

Fashola stated this at the recent 16th edition of the monthly power sector operators’ meeting hosted by the Niger Delta Power Holding Company (NDPHC) Limited at one of its transmission stations in Ugwuaji, Enugu State.

He explained that as large power consumers, state government that promptly pays the monthly electricity bills of their ministries, departments and agencies (MDAs) would be given approval by the Nigerian Electricity Regulatory Commission (NERC) if they applied to be eligible customers.

The minister also condemned the legislative order issued by the Enugu State House of Assembly directing the Enugu Electricity Distribution Company (EEDC) to quit the state over poor services.

According to EEDC, the state owed it over N2 billion in debt for electricity supplied to it over a period of time.
Fashola thus requested the state and House to settle their bills, and also recognise the laws guiding the power privatisation exercise, which grants EEDC rights to distribute electricity within its franchise distribution areas and which included Enugu.

He disclosed that since he declared the eligible customers regulation, a couple of interested large power users had contacted him to indicate their interests on its implementation.

“I have also exercised my powers under the Act to declare eligible customers in the sector and it is also receiving interests. I am told that the Discos are putting together a position, I will respond to it when I see it, but NERC is now responsible for giving effect to that programme. I also received representation from steel companies who have expressed interests to participate, as indeed, I have also received representation from a generating company that currently have six megawatts of stranded power because there was no policy that allowed it to pass the power to users. This same company sent me letters from six different companies, all asking that they want to take power from them,” Fashola said.

He further stated: “What I gathered from the unofficial soundbites that is going on from the Discos is that there is an argument going round that this will reduce the income of Discos from maximum demand customers, but I think that we must see the argument beyond income. We must see it first from the prism of service, and I have said if your service is good, why would anybody want to leave? Those who opt for eligible customers are going to pay more. We must first look at service before money because it is good service that makes the business sustainable. I have also told state governments that they are eligible to apply as eligible customers,” Fashola explained.

NECA Urges CBN to Reduce Interest Rates

The Nigerian Employers Consultative Association (NECA) has added its voice to calls to the Central Bank of Nigeria (CBN) to reduce interest rates in order to speed up economic recovery.
Last week, the Senate held a roundtable with the CBN, commercial banks and stakeholders in the financial sector, to deliberate on how to reduce interest rates.

Speaking at a press conference in Lagos recently, the President of NECA, Mr. Larry Ettah, argued that the current monetary policy tools have not been effective in reducing inflation in Nigeria, given that the country’s inflation has mostly been driven by currency devaluation, food production and distribution.

He said: “It is accepted practice in economic management in most jurisdictions that the correct posture in a recession is a reflationary fiscal policy and monetary easing, including reducing interest rates. Instead, the CBN has maintained tight monetary policy and raised interest rates.”

Continuing, he said: “We are of the view that this approach is sub-optimal and has failed. It is based on an erroneous assumption that tight monetary policy would constrain inflation and temper pressures on the naira. Instead, the actual experience confirms that Nigerian inflation is driven by cost elements usually currency devaluation and food and energy prices, while naira values are shaped by oil prices and the foreign exchange reserves rather than monetary conditions, especially as CBN has maintained administrative control of the currency value.”

He pointed out that manufacturers and other employers of labour have had to cope with a triple whammy of recession, high inflation and high interest rates caused by the wrong policy choices made by the monetary authorities.
The NECA President declared: “We call on the CBN to now move towards lowering interest rates and specifically to reduce the Monetary Policy Rate (MPR), which has been kept at 14 per cent since July 2016.”

He further stated that another dimension of the negative implications of current interest rate policy was that it has resulted in the “crowding out” of private sector access to credit by government borrowing.

According to him, “Data from the CBN demonstrates that credit expansion to government is outgrowing by large margins credit to the private sector. For example, between February and April 2017, while credit to government grew by 3.10 per cent, 27.81 per cent and 7.54 per cent respectively private sector credit grew marginally in February by 0.10 per cent; declined by 1.89 per cent in March; and also declined by 1.48 per cent in April on a month-on-both basis.

“On a year-on-year basis, credit to government expanded by 15.43 per cent, 19.76 per cent, 37.46 per cent and 42.15 per cent in January to April 2017, while private sector credit grew only 19.76 per cent, 19.17 per cent, 17.96 per cent and 13.23 per cent in the same period.”

He also observed that the phenomenon led the IMF to note in its recent Article IV Consultation Report on Nigeria that “lending to the private sector was largely crowded out by government borrowing, and remains essentially flat” based on 2016 data.
He said the development was a consequence of the high interest rate regime and the incidence of government borrowing through treasury operations at between 17-18 per cent.
“We urge the CBN to review this anomaly to empower the private sector to fulfil its role as the engine of economic growth as envisaged under the ERGP,” Ettah said.