Question: can better regulation improve Nigeria’s electricity sector?

My Response: Is the problem really regulatory or a lack of evidential investing opportunities in the broad distribution of electricity in Nigeria. Running a DISCO (distribution company) in Nigeria does not compound any real value if you run the regression analysis. 

Why? The best energy consumers in Nigeria (Dangote Cement, BUA Cement, etc) are not connected to the national grid. Those major industrials take out more than 30% of the revenue. The second tier – top Commercials – have figured out solutions for themselves. You take out another 20%.  So, any DISCO is losing potential revenue of at least 40% in its jurisdiction!

The remaining – low tier commercial and residential customers – hardly have resources to pay, making collection extremely challenging. You can argue on metering but the root cause is more than that. 

So, if you look at the opportunity, more than 90% of the profits in the electricity sector today are captured at the Generation. So, Transcorp Power, Geregu Power, etc, are better businesses because they have one great customer – the Nigerian government via NBET which buys in bulk. Those firms are multi-trillion naira publicly traded companies. You get the idea: if there is clarity on the customers, investors will come to invest.

My point: you can regulate whatever you want, but it is about the economics, and DISCOs will struggle in Nigeria for decades! Nigeria should not expect the DISCOs to find those resources because those who are expected to give them the funds do not see the paying customers, especially considering the fact that the rate is not really reflective. I mean have the rates adjusted for the new USD exchange rate and prices of fuel since those vectors do affect the electricity sector?

That is why more than 80% of DISCOs in Nigeria are either bankrupt or already taken over by banks or just fading. Electricity distribution is catalytic for commerce,  and governments must do it until we have companies with deeper pockets to run it.

As Microsoft gears up for its annual shareholder meeting on December 10th, a significant item on the agenda has caught the attention of investors and the tech community alike: the “Assessment of Investing in Bitcoin” policy. This proposal has sparked a debate on the role of cryptocurrencies in corporate investment strategies, reflecting the broader conversation happening across various sectors about the potential and pitfalls of digital assets.

The proposal, set forth by The National Center for Public Policy, suggests that Microsoft should consider diversifying its assets with Bitcoin, citing it as an “excellent, if not the best, hedge against inflation.” The think tank argues that in times of inflation, corporations have a fiduciary duty to protect their balance sheets with assets that appreciate more than bonds, even if they are more volatile in the short term.

However, Microsoft’s board of directors has advised shareholders to vote against this proposal. The board’s stance is that Microsoft’s management already carefully considers potential investments, including Bitcoin, as part of its strategy to diversify assets and protect from inflation. The Global Treasury and Investment Services team at Microsoft is tasked with evaluating a wide array of investments, and according to the board, they have already considered cryptocurrencies in their assessments.

Arguments Against Bitcoin Investment:

Bitcoin’s price is highly volatile, which can lead to substantial losses. The lack of clear regulatory frameworks in many regions creates uncertainty and risk.
The digital nature of Bitcoin makes it susceptible to hacking and theft.
Bitcoin mining consumes a large amount of energy, raising environmental concerns.

The board’s recommendation against the Bitcoin investment proposal is rooted in the belief that Microsoft has strong and appropriate processes in place to manage and diversify its corporate treasury for the long-term benefit of shareholders. They argue that a public assessment of investing in Bitcoin is unwarranted, given the internal evaluations that regularly take place.

This shareholder proposal comes at a time when Bitcoin’s role as an investment asset is being hotly debated. Some companies, like MicroStrategy, have seen significant returns from their strategic pivot toward Bitcoin investment. On the other hand, the volatility of cryptocurrencies remains a concern for many investors, particularly in the context of corporate investment strategies that traditionally prioritize stability and long-term growth.

The upcoming shareholder meeting will be a critical moment for Microsoft, as it will not only reflect the company’s stance on cryptocurrency investment but also signal to the market how one of the world’s largest tech companies views the future of digital assets. Shareholders will have the opportunity to voice their opinions and cast their votes on this pivotal issue.

For those interested in the intricacies of corporate investment strategies and the evolving landscape of digital assets, the Microsoft shareholder meeting will be an event to watch. It represents a microcosm of the larger dialogue taking place in boardrooms around the world, as companies grapple with the question of how, or if, to integrate cryptocurrencies into their investment portfolios.

As December 10th approaches, all eyes will be on Microsoft and its shareholders. The decision made at this meeting could have far-reaching implications, not just for Microsoft, but for the broader corporate approach to Bitcoin and cryptocurrency investments.