Recapitalize, sell DISCOs to new investors, Elemelu tells FG
By Emma Ujah, Abuja Bureau Chief & Emmanuel Elebeke & Michael Eboh
Industry chieftains across the subsectors and government functionaries, yesterday, discussed on how to move the Nigerian economy forward with the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu and the Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mr. Maikanti Baru, putting aside their differences and discussed opportunities in the Nigerian petroleum industry and ways to grow the sector at the 23rd Nigeria Economic Summit Group (NESG 23#) held in Abuja.
The summit with the theme: ‘Opportunities, Productivity & Employment: Actualizing the Economic Recovery and Growth Plan’ is projected to drive “consciousness and build national consensus on what is urgently required to rebuild, revamp and reinforce public-private dialogue for a collaborative and an all-inclusive economic growth”
Baru, a lead discussant at one of the session, came first at the venue of the programme, while Kachikwu walked in about 15 minutes later. As soon as the Minister of State entered, Baru stood, approached him and exchanged pleasantries with him.
Kachikwu also offered that he be represented at the second session of the dialogue by Baru, a request the organisers declined, because Baru was to chair a session and it would affect his participation.
While Kachikwu left, Baru stood in for him as the Chairman of the session, and when he returned, he joined as the co-chairman.
At the end of the programme, they exchanged pleasantries further, took some photographs, chatted and walked out of the hall together.
Speaking on the opportunities in the Nigerian oil and gas industry, Kachikwu said the industry has immense potentials which are growing on a daily basis.
He agreed that the operating environment is tough, but stated that the Federal Government was looking at areas where it can provide incentives to boost returns for investors, so as to attract more investors into the industry.
He explained that the Federal Government is putting in place machineries to increase the scope of its earnings in the industry.
He also noted that the environment is improving, adding that companies that had suspended their big ticket projects are beginning to look at the potentials of reviving the projects and are set to take Final Investment Decision, FID.
He said, “Financing is key. We are still yet to develop a model that enables local players access financing very easily. And an environment where we do not have lot of reserves, it would be very tough.
“We are going to be looking at all kinds of guarantee platforms, whether there are money to be set aside over a shorter time period with lower interest rates, whether they are international communities that are ready to invest on basis of guaranteed returns of certain barrels. We are going to see how we would work to come up with a model that would help people. And that is going to come after we do a study.
- ••Recapitalize, sell DISCOs to new investors — Elemelu
Speaking at the summit, Chairman of Heirs Holdings, United Bank for Africa, Mr. Tony Elumelu, advised the federal government to tinker with the ownership structure of Electricity Distribution Companies (DisCos) with a view to taking over controlling shares of the firms..
The aim, he said would be to enable the federal government sell such controlling shares to new investors with requisite technical expertise and financial muzzle to efficiently run the DisCos.
Speaking during a panel discussion at the Nigeria Economic Summit Group (NESG 23#) which opened in Abuja, Elumelu said that in as much as some existing investors might like the idea, the federal government could not continue to allow the Discos hold the nation down with inefficient power distribution.
The strategy, he said would be to call for the recapitalization of the Discos and then increase its stake from the current 49 per cent to 51 per cent and sell the controlling stakes to new investors, as the current operators had become obstacles to the realization of the nation’s power capacity goal.
His words, “I do business in 21 African countries. Our people are very enterprising and they want to succeed. But they need the right environment to succeed.
“I appreciate what the government is doing for electricity but we need to do more. I empathise with the government on its efforts in that sector. But Mr. Vice President, I think there is a lot we can do to correct the ownership of that sector without affecting the property rights of the investors. That sector must be dealt with it for us to have power to do business.
“Government is doing well as I said, over N700 billion provided. A few months time, that will be exhausted. The market should be able to sustain itself. This is what I think. The government has to take actions that will ensure that the adequate funding of the operations of the Discos.
Independent metering, eligible consumers’ directives’ll address distribution challenges —Osinbajo
In his address at the plenary, Vice President Yemi Osinbajo said that the present administration was addressing the power distribution problem using various initiatives.
According to him, the Independent Metering Directive would make it possible for private firms to meter consumers and get paid from the bills collected from such meters by the DisCos, admitting that the distribution companies have become a problem for the nation.
He added that under the new Eligible Customer directive, the willing-seller-willing buyer policy would enable the Electricity Generation Companies (GenCos) to sell electricity directly to certain categories of consumers without passing through DisCos, thus eliminating the huddles into which Discos have constituted themselves.
Prof. Osinbajo told participants that at the face of what has become a reversed globalization/localization, the federal government has come up with several policy actions to ensure Nigerians consume what they produce and produce what they consume, as much as possible.
The VP said that the nation had the capacity for about 7, 000 megawatts but that the Discos have made it difficult to get that volume of power to consumers, who need power in their homes and businesses.
His words, “There is a renewed confidence in the sector and we have already seeing significant investment for a variety of reasons including shortage of gas, limitations in the retransmission capacity, financing constraints, power supply was in the region of 3, 000 mw.
“We tackled these issues, although there is still some inadequacies in power supply. We moved up to 7,000mw in generation terms. We are at the moment dealing with constraints in distribution with two notable policy interventions: The NERC in August issues eligible customer directives and will this month issue a directive on independent metering.
- ••says its common sense to partner private sector
The VP said further, “Our policy of partnering with private sector is also born out of common sense of encouraging the private sector to build a modern economy. Its ability to do so is limited by its financial capacity.
“Government’s annual budgetary expenditure of N7 trillion, it is only a small part of what is multi trillion naira economy.
“The private sector is clearly a bigger contributor to the economy and it follows that the private sector must be enabled and encouraged to play a decisive role if our development efforts are to succeed.
Capital inflows in Q2 stand at $1.8 bn
“Results have been encouraging as inflows of capital in the Q2 of 2017 has risen to about $1.8billion, which almost doubled in the first quarter, Q1 this year at about $8million.
Another issue of great concern last year was the loss of a significant amount of oil production. At some stage, we were losing about 1 million barrels of oil due to engagements and commitment with new vision for that region, production has been restored to nearly 2million barrels per day. At the same time, the debt overhang preventing additional investment with additional investment in the oil sector has been addressed with joint venture cash calls arrears.
“Since we undertook the responsibility of diversifying the economy, leading with the agricultural sector, the sector has created a large number of jobs and it is now an important source of raw materials to know that it has been a means for generating foreign exchange.
“Our anchor Borrowers Progarmme launched by the President in 2015 has benefited 200,000 small scale famers and attracted investment of up to N43 billion from participating institutions.
“What is particularly encouraging is that we are moving steadily towards sufficiency in rice production, Sorghum and several other products, and scaling up in eight other commodities and produce for food security and export.
“The now concessioned narrow gauge railway to full operation and help redress the high cost of transportation, especially for food items.
“We have also kicked off the Ibadan segment of the Lagos-Kano standard gauge rail line early this year.”
Ease of Doing Business
“Our efforts to improve business environment is ongoing and have introduced a reform under a 60 Day National Action Plan focused on 8 areas that will make it easier to make business easier for people, registration of business, obtaining of construction permits, trade across borders, regulating entry and exit of people and registration of property.
“Our Visa on arrival process has proven effective. We are working with Kano, Lagos and Rivers state government through the cross borders facilitating exit of people and registration of property.
“One of the proposals by the MAN in the promotion of Local Content Initiative is Margins of Preference. And we have to take that. Meaning that if we want to buy something and the local content is higher we have to buy the local content goods.
“We are looking at the percentage of the proposal, though have already agreed in principle and we think the margins of preference is sensible to do so.”
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