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Nigeria counts losses as delay in ministerial appointments hits investors

There are signs of growing discomfort among investors over the delay in Nigerian President Muhammadu Buhari’s appointment of cabinet ministers and it is taking a toll on businesses and the economy.

More than a month after Buhari was sworn in for a second four-year term in the month of May, local and foreign investors are in the dark over who heads which ministry, particularly key positions like finance as well as industry, trade and investment.

Being a developing country with a history of policy inconsistencies and a public sector that is larger than life, foreign investors typically interface with high-level government officials – a category ministers fall under – to set an investment in motion. This way, they hope to get some assurance over the safety of their investment dollars.

The uncertainty over the identity of Nigeria’s next batch of ministers has led some foreign direct investors to hold off on potential big-ticket deals while portfolio investors are beginning to redirect cash to other countries that are ready for business, two chief executive officers of leading financial houses told BusinessDay.

According to them, some foreign government agencies and Development Finance Institutions (DFIs) are also staying away or not engaging because there are no ministers.

“There are people who are currently negotiating to invest in the country but they are waiting to see those that would be appointed to engage with them,” one of the CEOs whose investment firm manages over a thousand foreign clients said.

“Whenever we engage with investors, they are curious about knowing who the new minister of finance and who the new minister of trade and investment would be,” another CEO confirmed

A six-month delay in the appointment of ministers during Buhari’s first term formed part of the recipe for an economic recession in 2016 after it contributed to a steep decline in foreign investment.

Total foreign investment into the country nearly halved to $5.1 billion in 2016 from $9.6 billion in 2015, and was down 75 percent from $20.8 billion in 2014, according to NBS data.

Many Nigerians and international observers had expected President Buhari to hit the ground running in his second term.

“There is nothing to suggest that we have learnt the lessons of 2015,” an independent economist who consults for one of Nigeria’s state governments said on condition of anonymity.

“It adds like an extra 50 basis points on the country’s risk premium,” the economist said.

Yields on Nigeria’s benchmark 10-year Federal Government bond have ticked upwards, albeit by a mere 4 basis points to 14.39 percent as at July 2, from 14.35 percent at the end of May.

Traders say yields have reacted more to the movement in oil prices and the stability in the naira than the delay in ministerial appointments.

The performance of Nigeria’s publicly-quoted companies has been woeful. Stocks are down an average of 6.5 percent since the beginning of 2019. Blue chips from Dangote Cement to Guaranty Trust Bank have been hit by negative investor sentiment no thanks to the perceived lack of urgency in the implementation of reforms needed to boost economic growth.

“These delays are becoming the norm in Nigeria and it shows how unserious we are as a nation,” a former public official told BusinessDay.

The delay slows down the pace of critical reforms since action typically comes from the ministerial pool, not civil servants who want things to remain as they are to extract rent.

“That gives the impression that we are not keen on implementing the reforms that will open up the economy,” the former government official added.

At 2 percent, the economy is growing at a rate below that of the population (2.6 percent). It means per-capita GDP is on the decline which the IMF expects will last eight years if Nigeria continues to hold off on critical reforms in power and the oil sector.

Some sources, however, told BusinessDay that President Buhari is set to release a list of nominees to the Senate.

They blamed the delay on the inability of the Senate to constitute its principal officers, especially the election of the Senate Leader whose responsibility it is to announce such requests from the President.

BusinessDay findings show the President had on Monday invited the two senior special assistants in charge National Assembly Matters, Ita Enang (Senate) and Umar Yakubu (House of Representatives) to a closed door meeting.

The meeting, BusinessDay gathered, was summoned ahead of Tuesday’s resumption of the National Assembly for full legislative business.

Although the list is ready, our correspondent at the Presidential Villa was told, the President has kept the names of nominees as a top secret.

For President Buhari, forming a cabinet might not hold much weight for the economy going by a statement he made in an interview with a French TV station France 24 in 2015, where he argued that “ministers are noise makers”.

However, if examples from other countries are anything to copy from, it took South Africa’s President Cyril Ramaphosa only 96 hours from the day he was sworn in to appoint a cabinet.

Immediately the 66-year old president announced the naming of the ministerial cabinet, it sent a signal of his readiness to hit the ground running. The South African rand reacted positively, gaining some 0.5 percent against the dollar, after an initial loss of 1 percent prior to the announcement.

By LOLADE AKINMURELE & MICHAEL ANI, Lagos, & TONY AILEMEN, 

Restructuring DisCos is first step in fixing a broken power sector

In their current situation, no investor will pay $1 for any of Nigeria’s 11 electricity distribution companies (DisCos). In fact, any serious investor would have to be paid to take them but even then, they probably would still not be attractive. Not with a balance sheet where contingent liabilities far exceed assets.

This situation has led to calls for a radical restructuring of DisCos who are now technically bankrupt, and maintain a semblance of existence only on account of government subsidies. This restructuring will require all stakeholders taking a haircut on their asset, instituting corporate governance and restoring best practice.

It starts with understanding that a loss of N713bn since privatisation has negative consequences for the sector and poses systemic risk to the economy as a whole and agreeing to return the sector to a sound commercial template. Furthermore, the Federal Government with a 40 percent stake in the DisCos that continues to bail out the sector needs to start taking requisite action to check the excesses of the investors.

The option is to either restructure or continue digging a hole in the form of subsidies which will eventually trigger a shutdown of the entire decrepit system.

The DisCos reported a combined loss of N446.85bn in 2017 which is 64 percent higher than the previous year. Their total combined operating cost of N655.16 billion in the same period outstripped cumulative sales of N563.10 billion. Interest expense surged by 129.51 percent to N155.64 billion, indicating a balance sheet that’s unsustainable.

Restructuring the DisCos’ balance sheet will entail writing off at least half of their over N2 trillion exposure to the Nigerian Bulk Electricity Trading Company (NBET) and the Central Bank of Nigeria (CBN). The Federal government through NBET can convert the rest to convertible long-term debt. This will give the balance sheet a new lease of life to present to new investors.

But the DisCos do not get a free pass. The CBN and other commercial banks of which the core investors have exposure of over N500 billion will treat the debt like any other commercial debt.

Banks can choose to convert their debt to stakes in the DisCos but the core investors will also be given the right to buy at the same share price. DisCos’ current shareholding will be diluted and in exchange for government’s acquisition of their debt, a special agency can be created to professionally represent the stake of all investors including the government.

Analysts say tariff must represent the true cost of production but tariffs higher than N45-50 per Kw/hr may derail the plan. Embedded generation plants with gas as feedstock are offering industries tariff around N40 and N50 per kWH/hr and solar energy tariff are now lower than 10 cents. Higher tariff will shift the market to cheaper alternatives.

The DisCos have consistently said that a lack of cost-reflective tariff is the key reason for their losses. This is worsened by electricity theft and debt by government ministries and departments.

“Electricity pricing must be reflective and NERC must step up action to check electricity theft,” said Ayodele Oni, energy lawyer and founder of Bloomfield law firm.

Oni also said that NERC must also enforce obligations in DisCos’ performance contracts and should maintain independence from the executive arm of government.

DisCos have to also raise collections as market information from NBET indicates that they currently only collect 30 percent of market invoice from customers.

Restructuring the DisCos will make way for new investors who will inject fresh capital into the business. A sound management should be put in place to run the transition to new investors.

Chuks Nwani, energy lawyer and vice president of consultancy firm, PowerHouse International, proposes that the Federal Government create a debt instrument to cover half of DisCos’ tariff

.

Within the period, pressure on the DisCos’ balance sheet will ease off while they are compelled to make investments to improve their network, cut down on aggregate technical, collections and commercial losses (ATC&C) and if power distribution improves, they can then begin to recover through higher tariffs and at the same time repaying their debt.

“This is a better option instead of continuing to allow the Central Bank to continually provide intervention funding,” Nwani said.

Nwani said that within the five-year period, NBET will monitor investment plans the DisCos will submit while the Transmission Company of Nigeria (TCN) will also implement an improvement plan. NERC will monitor these plans for compliance while enforcing compliance with performance contracts.

However, Nigeria’s 11 DisCos distribute a paltry 4,000 MW, a capacity too little for efficient pricing to make the sector viable. Generation companies (GenCos) are burdened with so much debt that asking them to bring the total installed capacity of over 12,000MW on stream will require massive investments. Worse still, the TCN cannot effectively wheel half of the capacity without the grid collapsing.

Analysts say NERC should implement the DisCo franchising regulation which allows third-party investors to provide electricity within a franchise area earlier ceded to DisCos.

Other regulations, including the mini-grid which opens up investments into the off-grid sector, must be promoted as well as the eligible customer declaration, which allows GenCos to sell power directly to big consumers of power.

Source:  By ISAAC ANYAOGU

nigeria as the poorest country

Why my policies, programmes, projects are unpopular, by Buhari

Promises formidable cabinet to deliver mandate
President Muhammadu Buhari yesterday declared that his decision to move against very powerful individuals remains unpopular and challenging. He explained that most of his administration’s policies and programmes were also being rejected by only those whose interest has been affected.

The president, who spoke when he received the Buhari Media Organisation (BMO) led by its chairman, Omoniyi Akinsiju, at the State House, Abuja, assured his visitors that he would put together a formidable team to deliver his Next Level mandate to Nigerians.
Exactly 34 days since his inauguration on May 29 for a second term in office, Buhari is yet to appoint a cabinet. It is unclear if it will take the president as long as the period it took him in 2015 to constitute the Federal Executive Council (FEC).

There are already criticisms and concerns from stakeholders and citizens who fear the economic dangers the delay portends for the country. The Nigerian leader said: “It is not an easy job to sell the administration’s services, as we are doing unpopular things and facing powerful individuals and taking on vested interests who are accustomed to the corrupt era.

“But we must do things the right way. If we promised change, then we must deliver it. This is regardless of whose interest is touched. There must be a manifest departure from the old order.“We are making significant progress and this is evident. Despite attempts by enemies to twist and bend facts, most Nigerians know the truth.”

Buhari, in 2015, attributed his failure to expeditiously constitute his cabinet to his quest to assemble a capable team that would galvanise the administration’s programmes. He had also said he also needed to restructure the ministries to effect his party’s mantra of change in government processes and operations.

The president, who said he was aware of the anxiety and impatience exercised by Nigerians, said those feelings were unfounded, as he intended to do things “methodically and properly.”

The nation’s first citizen again assured the citizenry of his resolve to leave Nigeria better the raging security challenges notwithstanding.

Also in the delegation is Tunde Thompson, who was imprisoned under the draconian Decree 4 of 1983 by his then military administration.

The leader of the team, Akinsiju, had stated: “The organisation regularly commissions the writing and publishing of newspaper opinion articles and press statements to elucidate and amplify government programmes and clarify socio-economic and political issues being undertaken by the administration.”

Source: Guardian

Nigeria’s ‘Dead capital’ Rises to $900 Billion

Latest report by the PricewaterhouseCoopers (PwC), has revealed that Nigeria needs to unlock as much as $900billion worth of dead capital to increase economic activities and stimulate growth.

In a new report titled, ‘Bringing dead capital to life – What Nigeria should do’, estimated the amount of dead capital in residential agricultural and real estate sectors in Nigeria, which it said: “holds at least $300billion or as much as $900billion worth of dead capital in residential real estate and agricultural land alone.”

The report said the high-value real estate market segment held between $230billion and $750billion in value, while the middle market carried between $60billion and $170billion.

‘Dead capital’ was coined by a Peruvian economist, Hernando de Soto, to define assets that cannot be converted to economic capital.

With Nigeria’s population projected at 200 million and 40 million families with five members each, the report said, “Approximately 95 per cent of household dwellings in Nigeria have no title or a contestable title.”

PwC said the International Monetary Fund (IMF’s) most recent report on Nigeria, concluded that the country was set to experience an incremental decline in income per capital over the next eight years, through 2022.

It said, “This decline is a result of slow GDP growth exceeded by a population growth rate that is not expected to slow in the near future. The population is expected to reach 263 million by 2030. In contrast, GDP is growing at a slower and less consistent rate, averaging 1.4 per cent since 2016.

“In order to circumvent this projected crisis, Nigeria requires more investment in critical areas that directly impact economic growth. Heavy investment in infrastructure, coupled with structural reforms, will loosen domestic and foreign capital, allowing more businesses to thrive. In the long run, investing in human capital will yield economic prosperity by overriding high unemployment in a large population.”

The PwC report also noted that lack of access to finance is a major contributor to persistent poverty.

“Presently, a large proportion of Nigeria’s population operate in the informal sector by living in informal dwellings and/or working in the informal sector. For many, the costs accrued in the formal sector outweigh the benefits. However, this creates a large stock of dormant assets. Capital is scarce in societies with a large stock of dormant assets.

“Land tenure system in Nigeria is still largely in the communal and informal sectors. Sporadic efforts by the government on the formalisation of property rights through the certificate of occupancy in cities like Lagos have yet to meet the intended goal.”

It added that land ownership had been quite a stressful process as a result of the complex land tenure system, as the Land Use Act had failed to establish a uniform land tenure system that would govern ownership in the country.

According to the report, about 97 per cent of land in Lagos is unregistered, and makes it difficult for banks to validate claims to land or for land occupants to use their land to create wealth.

Source: Guardianng

Cheap houses selling fast in Sunshine Coast’s ‘northern suburb’

Droves of Sunshine Coast home owners – attracted by homes often half the price – are pulling up stumps and buying in Gympie, local agents say.

The latest Domain data shows that in the Wide Bay-Burnett district town housing values are up 14 per cent since 2014.

Moreover, its cheapest 25 per cent of house sales have risen in value by 13 per cent in the past five years.

While it’s hardly bad news, what it means is that Gympie’s median house price is a budget-friendly $330,000 – almost 46 per cent less than the Greater Sunshine Coast region’s median house price of $610,000.

Data puts the coast’s median unit price at $430,000 in March this year.

These stark price gaps are not lost on coastal residents who, fed up with increasing traffic and booming population sizes, are “finally discovering us”, said Clancy Adams of LJ Hooker Gympie.

Mr Adams reports he has been selling three-bedroom “character” houses in the 20,000-strong town, in need of full renovation, for around $200,000 in under three weeks since the May federal election, and similarly sized houses in better condition for the mid-$200,000s.

“It [Gympie] has always been here and people are getting tired of the congestion on the Sunshine Coast and searching for affordability,” Mr Adams said.

26_Old_Maryborough_Rd_Gympie_gqqoto
Gympie’s housing is more affordable but it is still a commutable distance from Brisbane and the Sunshine Coast, agents say. Photo: Tom Grady Real Estate

“They are saying, it [the coast] has changed, that it is not the lifestyle they bought into 20 years ago, and with the [Bruce Highway] bypass meaning 45 minutes to Noosa Heads, two hours to Brisbane, it is only 20 minutes extra for people commuting these days.

“[Gympie] is pretty much being seen today as a northern suburb of the Sunshine Coast.”

Mr Adams reports “there are still a few cheapies around” and investor yields remain unaffected: still 5 to 6 per cent on average.

About $500,000 will buy one to two hectares with four beds, two baths, a double garage and a possibly pool in Gympie municipality, about 40 kilometres northeast of Noosa Heads, he says.

“They [Sunshine Coast buyers] are selling their four-bedrooms on 400 square metres for about $400,000 and reinvesting here for not much more than half that price,” he said.

“Even if they buy and know they have some updating ahead, they are still well in front.”

51_Clematis_Street_Gympie_oyh5mu
Houses like 51 Clematis Street, Gympie, are being snapped up by out-of-town buyers. This property is listed for sale for only $249,000. Photo: Century 21 Platinum Agents

According to Domain sales figures, houses in Gympie’s lowest percentile (house sale prices in the bottom 25 per cent of total sales) sold for a median price of just $260,000 between October 31, 2018 and April 30 this year.

Properties under $250,000, which includes houses and units, currently make up a third of all sales.

Total listings dropped by 5.4 per cent in the past six months, with house listings decreasing by 10.6 per cent and house sales falling by 23.5 per cent.

Greg “Bert” Gilmore of Tom Grady Real Estate in Gympie agrees the cheaper stuff ($180,000 to $200,000) doesn’t last too long, although housing in the early $300,000s had not seen any change.

“People from the Sunshine Coast love buying up here right now because they cannot get anything near the coast any more,” Mr Gilmore said.

“I had a nice open house just recently for a three [bedroom] by three [bathroom] and three groups, all from the Sunshine Coast, came through.

“In terms of motivation, it is a bit of buy to live in and a bit of rent out. But it is still a buyers’ market overall.”

4everson_lane_gympie_u7r42j
Greg ‘Bert’ Gilmore says houses at the lower end of the market in Gympie do not stay on the market for very long. Photo: Tom Grady Real Estate

Local sources tip construction on the fourth and final stage of the four-lane 62-kilometre bypass – which will link Curra with Woondum – will start in early 2020.

“This four-lane bypass has and is going to make a bit of a difference,” Mr Gilmore says.

Billy Mitchell, principal of Century 21 Gympie, told Domain it had been a fantastic year and “surprisingly” upbeat since the election.

“Anything in that low $200s market will be sold in under 45 days; even 30 days,” Mr Mitchell said.

Asked why lowest-priced houses were moving so fast – and who was buying – he also credited the region’s four-lane highway, and affordability.

The Mary River town also claims a virtually non-existent rental home vacancy rate.

“The [buyer] drive is coming from the Sunshine Coast plus we are less than an hour to Tin Can Bay, to Hervey Bay, and under two hours to the Brisbane Airport,” Mr Mitchell said.

“I really think it is all about affordability in the past two years, when you consider the Sunshine Coast market and ours.

“Of course it depends on where you work, but if you are travelling for 40 minutes to get to work and can buy a nice family house, three or four-bedrooms on a quarter-acre block, sell up your Sunshine Coast home and have $200,000 left over to stash in your kitty – look, it is a pretty compelling reason to do so.”

National Association of Realtors: ” Real Estate will continue to see growth, amid a strong economy”

National Association of Realtor’s chief economist Lawrence Yun’s remarks came during a talk at the Realtors Conference & Expo in Boston last week, where he added that in his opinion another recession seems unlikely in the short term due to the country’s sound economic fundamentals.

Yun also forecast around six million new and existing home sales by the end of this year, and slightly more in the next couple of years. The economist also believes home prices will continue to grow at a modest rate, around 4.7 percent in 2018, 3.1 percent in 2019 and 2.7 percent in 2020.

Key Takeaways

  • Yun forecast around six million new and existing home sales by the end of this year
  • New homes are being added to the market at a rate of around 1.2 million per year, but that’s below the historical average
  • Yun said there’s little chance of a recession happening as inflation remains under control, and so any interest rate increases by the Federal Reserve will likely be moderate.

However, Yun said these positive trends would only occur if homebuilders are able to keep up with demand by adding new inventory to the market. New homes are being added to the market at a rate of around 1.2 million per year, but that’s below the historical average and well off the 1.9 million homes that were built in 2004.

There are no signs of a housing bubble at least, Yun added. He said that even though home prices have been outpacing income for several years now, the overall economy in the U.S. is still fundamentally sound, that mortgage quality is high, and that due to the persisting inventory shortages in many markets, there is no danger of the overbuilding that preceded the Great Recession.

Some risks do exist though. Yun said the threat of a full-scale trade war between the U.S. would hamper economic growth, and lead to higher interest rates for long-term debt instruments. If that happened, it’s likely a recession would occur, Yun said.

One piece of good news is that Realtors themselves can help do their bit by reminding their clients that the economy is still healthy and that all signs point towards positive home price increases. Yun said there’s little chance of a recession happening as inflation remains under control, and so any interest rate increases by the Federal Reserve will likely be moderate.

In other words, it’s a good time to buy a home, Yun said.

“All indications are prices will keep moving higher, and buyers who wait risk missing out on wealth gains,” he said.

Source: Realty Biz News

The Next Housing Bubble Could Come From Technology

(Bloomberg Opinion) — A decade after the housing crash, it is now possible to buy or sell a house with the click of a mouse. If the practice catches on, it could lead to a far more efficient and affordable housing market — or another devastating bubble.

So-called iBuying (for instant buying) involves firms using algorithms to provide sellers with fixed-price offers on their homes. While housing is a good long-term investment, it is bedeviled by multiple instances of market failure. The most fundamental is that the seller has a lot more information about the condition of the property than the potential buyer. Buyers and investors are therefore cautious. Disclosure requirements help, but they are often lengthy and confusing.

This is where the algorithms come in: They read disclosures, do market comparisons, evaluate timing, assess nearby rental vacancies and consider a host of other factors to arrive at an estimate of the house’s value. That allows the iBuying firms to comfortably offer an instant price. Last year in Phoenix, Arizona, approximately 5% of the homes were sold through instant buying, and investors own as many as 22,000 houses in the area.

But the real potential of iBuying is during the next real estate downturn. As the real estate market slows, the opportunity to sell instantly will become more attractive, and more properties could end up in the hands of big investors.

This ability to sell properties instantly also encourages the adoption of a second technology: click-to-buy. For many of the same reasons big investors have been reluctant to move into the home market, small-time real estate investors have traditionally taken their time and stayed in neighborhoods they know well.

But now online real-estate firms such as Redfin are offering better technology, such as 3D maps, which allows potential homebuyers to purchase sight unseen. A large inventory of homes owned by respected firms would add liquidity to this market, allowing small investors to get in and out more easily.

Together, these two technologies could serve as a kind of market-maker: A platform that allows buyers and sellers to find each other. As an asset that can be easily bought and sold at known prices, real estate would be coveted by investors, who are willing to accept a lower return on their investment in exchange for the convenience of easy trading.

The yield on an asset is its price divided by the yearly cash flow it generates. For stocks, the cash flow is dividends. For houses, it is rental income. Housing investors have generally considered a price-to-rent ratio of 12 to 15 as a good investment. That corresponds to a yield of  7% to 9%. On the other hand, the average dividend yield on stocks is about 2%, corresponding to a price-to-dividend ratio of just over 50.

So what would happen if houses became as easy to trade as stocks? At first, the price of homes would soar. That happened during the last housing bubble, when lower lending standards added liquidity to the housing market by making it easier for investors to sell quickly to less qualified borrowers.

At the peak of the housing bubble, the average price-to-rent ratio in the U.S. rose to about 21, well outside the range housing investors consider safe. The existence of a market-maker in housing, however, could drive yields down to the level of stocks, creating a potential bubble twice as big as the one that occurred in the early 2000s.

A lot depends on how the home construction market responds if this new technology catches on. With homes selling at 50 times yearly rent, the incentive to build more homes would be huge. Investment would flock to home construction, expanding supply and pushing down both prices and rents. The price-to-rent ratio would remain high, but because rents were falling, home prices would eventually come down to affordable levels.

On the other hand, if the supply of houses did not expand, then housing prices would remain elevated — and investors would eventually crowd out owner-occupiers in the housing market. The U.S. would become a nation of (mostly) renters.

A rigid supply of housing would also make prices more volatile. During good times housing prices would soar, just as they do in the stock market. In bad times prices would crash. That volatility could add permanent instability to the U.S. economy.

Nigeria’s shadow economy is becoming too big to ignore

Nigeria’s informal economy is becoming too big to ignore for a country struggling with economic growth and job creation.

The informal economy encompasses the broad range of economic activities not captured in a country’s official statistics.

Informality in Africa is highest in Nigeria, according to the World Bank, which values the activities of the sector at $302 billion.

That means the sector accounts for 80 percent of the country’s Gross Domestic Product and is as big as Qatar and Angola combined.

If viewed as a standalone economy, Nigeria’s informal sector would also be the second fastest growing in Africa behind Ethiopia, going by estimates from consulting firm FDC Ltd, which shows the informal economy has expanded by an average of 8.5 percent over the last three years.

The impact of sucking in the informal economy could be telling for a country that has been struggling for growth since the 2016 recession. While the formal economy grew a paltry 1 percent between 2016 and 2018, the informal sector has expanded eight times faster.

Merging the informal economy with its formal counterpart would value the economy at $678 billion, almost double the official size of GDP which was $376 billion in 2017.

“There are certainly benefits to bringing more people into formal structures, but people can’t be forced into formal structures,” said Andrew S. Nevin, chief economist at consulting firm PricewaterhouseCoopers (PwC).

“The formal structure has to be better than the informal or self-organised structure,” Nevin told BusinessDay.

Other factors that contribute to keeping the informal sector away are regulatory bottlenecks in setting up formal enterprises, multiple taxation, and rigorous business registration processes.

Though the ease of doing business has somewhat improved, analysts say more work needs to be done by the government to incentivise informal sector players to be officially captured.

Giving tax breaks and providing infrastructure have worked magic in other climes where the government sought to draw informal activities into the formal fold.

Businesses in the informal sector, as do their formal counterparts, suffer limited growth, constraining income generation and ability to hire more people. This takes a toll on the economy and even public revenue.

 

“It would be a win-win for all parties if government recognises existing corporatives in informal sector, support them to have skills required to transit to formal economy,” Ayo Teriba, CEO Economic Associates, said.

The high incidence of informality, whilst a major challenge, presents opportunity for achieving “decent work for all and sustainable and inclusive development”, Rafael Diez de Medina, director, International Labour Organisation (ILO) Department of Statistics, said.

Nigeria’s government is struggling to generate more revenue to finance its growing budget amid unreliable oil revenue. The country’s debt has grown more than 160 percent to N24 trillion in the last five years. Tax to GDP remains low at 6 percent, one of the lowest globally.

Integrating more people into the formal sector would translate to higher tax revenues for the government and harnessing the potentials inherent would boost the economy

The gains might not be realisable in the near term, said Boniface Chizea, MD BIC Consultancy Services.

“The government has to move closer and understand the operations of the informal sector, then mobilise them through corporative, create business hubs and improve business environment,” Chizea said.

The dilemma is that while the government has become more intent on improving its tax revenue, the informal sector is shying away from the extra costs that come with that.

“Most SMEs won’t participate in the formal sector unless it can significantly improve their business. Most of them are tax averse,” he added.

Improving business registration process, credit to businesses, restructuring tax policy to be supportive of business growths as well as broader economic reforms remain essential.

BY LOLADE AKINMURELE, ISRAEL ODUBOLA & SEGUN ADAMS

Job loss, Unemployment Rate Reached 23.1% in June — Expert

The President, African Statistical Association, Prof. Dahud Shangodoyin, has said Nigeria’s dwindling economy led to loss of more jobs and an increase in unemployment rate to 23.1 per cent in June.

He said given the increase in population and a continued increase in the number of job seekers, the federal, state and local governments could not provide adequate opportunities for economic growth.

Shangodoyin, a professor of statistics, University of Botswana, stated this in a lecture titled, ‘Nigerian Population Explosion and the Role of National Planning,’ at the South-West zonal summit of the Nigerian Institute of Management in Ibadan, Oyo State.

He noted and regretted that only 26 per cent of the 10 million applicants secured admissions into tertiary institutions between 2010 and 2015, with another 10.5 million children out of school, the largest globally.

Shangodoyin said the only way to resolve the impact of population explosion on sustainable development was to have developmental planning revolution in Nigeria.

“We must recognise major trends and issues in Nigeria’s population dynamics. To do this, we must conduct our long overdue national population and housing census. Some trends and issues (such as reduction of infant mortality, family planning, changes to immigration policies, contraception and many others) that have direct impact on the resources on which human life depends (lands, water and biodiversity) should be addressed.

“Our population is increasing exponentially and calls for urgent attention on developmental planning. The management of population is vital to the development of Nigeria. Our first major population policy prepared in 1988 failed to deliver on its targets which included reducing the fertility rate, addressing early marriages and cutting down on population growth. In 2004, the national policy on population for sustainable development was launched but again fell short of all its targets.”

He said Nigeria would be among the “top-four most populous countries in the world with well over 289 million people by the year 2050.

Earlier in his speech, President and Chairman of Council, NIM, Prof. Olukunle Iyanda, lamented that “owing to cultural and religious factors, there had been little or no efforts in controlling the population of the country.”

The zonal Chairman, NIM South West zone, Stella Olaniyan, said, “One fundamental solution to prevent the adverse effects of increasing alarming rate of our population is for us to strategically plan as a nation.”

Source: Punchng

Power grid suffers total collapse, TCN may expel Discos

The nation’s power grid recorded its eighth total collapse this year on Sunday, plunging consumers across the country into blackout for some hours.

The government-owned Transmission Company of Nigeria, which manages the grid, blamed electricity distribution companies for the system failure, which it said occurred at 9.10 am.

Total generation stood at 3,825 megawatts as of 6.00 am on Sunday, compared to 3,260.9MW on Saturday, the data obtained from the Nigeria Electricity System Operator, an arm of the TCN, showed.

The grid suffered four total collapses in January and one each in February, April and May, according to the system operator.

Enugu Electricity Distribution Plc had announced on its Twitter handle on Sunday afternoon that “the present loss of supply in the entire South-East is as a result of a system collapse which occurred at 09.21 am of today, 30th June, 2019.”

“This is as a result of a fire outbreak on Benin 330KV transmission line reactor. As a result of this unfortunate development, there is zero supply to all customers in our franchise areas as all our injection substations are affected,” it added.

Another Disco, Kaduna Electricity Distribution Plc, also informed its customers about the system failure from the national grid.

“We are currently experiencing a system collapse from the national grid, hence the power outage in our franchise states. Normal supply to our customers will resume as soon as the national grid is back up and stable,” it said on Twitter.

The TCN, in a statement made available to our correspondent around 6.28 pm, said the national grid experienced a system collapse today at 9.10 am due to high voltage following a massive drop of load by the electricity distribution companies.

It said the high voltage also caused a fire incident in the 75MX reactor in the Benin Substation, Sapele Road in Benin City, Edo State.

“The massive load drop led to high voltage in the system, which shattered the lightning arrester in close proximity to the 75MX reactor in Benin Substation. The shattered lightning arrester porcelain hit the reactor bushing, causing a further explosion on the reactor and resulting in a fire outbreak.”

The TCN said the restoration of the grid commenced immediately and as of 1.30pm, bulk power supply to most parts of the nation had been restored.

The company said it had commenced the movement of another reactor to Benin City to replace the burnt reactor and ensure voltage stability in the city as well as prevent a re-occurrence.

It said, “Management would also ensure a review of the entire protection and earthing system nationwide. This is done in addition to the overall upgrading of the system through the TREP programme being financed by multi-lateral donors.

“The installation of three reactors on the Ikot-Ekpene-Ugwuaji–Jos line has reached an advance stage. It is expected that once these three reactors are installed and inaugurated, the grid would be further stabilised. TCN management wishes to assure Nigerians that it is doing everything possible to modernise, upgrade and stabilise the national grid.”

Meanwhile, the TCN has said it may expel some Discos from the market as a result of their inability to provide their security cover.

Last week, the Market Operator, an arm of the TCN, ordered the suspension of Enugu Electricity Distribution Company, Ikeja Electricity Distribution Company and Eko Electricity Distribution Company from the MO-administered markets for failing to renew their security cover.

According to the TCN, security cover when so required of an amount established by Market Operator to serve as a form of guarantee of payment for all amounts due from the participant to the MO.

The Managing Director, TCN, Mr Usman Mohammed, in a telephone interview with our correspondent on Sunday, said Enugu Disco was given a disconnection notice while Ikeja and Eko Discos only got a notice of suspension from the market.

He said if they don’t make good within a certain period of time, the next thing that will happen is that they will be expelled, and when they are expelled, it means that the Nigerian Electricity Regulatory Commission will be notified that those people are incapable of meeting their responsibilities in the market, so NERC should invoke its business continuity regulation to ensure that they are replaced.

“We did not disconnect Eko and Ikeja Discos because the gravity of their offence did not warrant that. But in Enugu, we disconnected some lines. When they (Enugu Disco) make good, they will be restored to the market. But if they don’t, they will go to the next level, which is expulsion.”

Source: Punch Ng

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