The Minister of Power, Chief Adebayo Adelabu, has declared that Nigeria should transition to a full cost-reflective tariff regime to address the challenges plaguing the country’s electricity sector.

During a nationwide inspection of power installations, Adelabu expressed deep concerns over the poor electricity supply caused by outstanding subsidy debts and the under-capacity utilization of National Independent Power Plants (NIPPs) managed by the Niger Delta Power Holding Company Plc (NDPHC).

The Minister’s visit included assessments of the 750 megawatts Olorunsogo Power Generating Plant in Ogun State and the 500 megawatts Omotosho Generating Plant in Ondo State.

Following the inspections, Chief Adelabu emphasized the need for the federal government to either fulfill subsidy promises or transition to a fully cost-reflective tariff system.

“We have been to Olorunsogo and we are now in the Omotosho Power Plant. These are big power plants. I am impressed with the size and the technology of the power plants here. Their operational history is also impressive,” said Chief Adelabu during his visit.

He continued, “And we also want to appeal to the federal government that once there is a subsidy promise, it has to be fully funded. If our government is not ready to fund subsidies, it is actually better for us to migrate to a fully-cost-reflective tariff, because liquidity is a major issue in the sector, which has led to a huge debt being owed power generating companies.”

The Minister highlighted the need to address the outstanding subsidy debts, as they contribute to a cascading effect on the entire power supply chain. Unpaid debts hinder power-generating companies from settling their dues with gas suppliers, leading to reluctance to provide regular gas supply, exacerbating the overall power supply situation.

Acknowledging the financial challenges in the power sector, Chief Adelabu stated, “So where are these debts piling up? Where are they coming from? Part of it are the Discos owing some portion of these debts while the federal government is also owing a huge portion of these debts, which relate to the unfunded portion of the subsidy that they pledge.”

The Minister assured Nigerians of his commitment to resolving the situation through discussions with relevant stakeholders. He mentioned ongoing meetings with the Minister of Finance, Coordinating Minister of the Economy, Minister of Budget and National Planning, and the Special Adviser to the President on Energy.

These meetings aim to explore ways to inject liquidity into the sector and address outstanding debts owed to power-generating companies.

However, the Minister’s suggestion of a transition to a fully cost-reflective tariff has not been well-received by Nigerian electricity consumers. Many argue that they are already burdened with high bills, especially considering that around 60 percent of consumers are unmetered, receiving bills that do not accurately reflect their monthly consumption.

Nigeria currently generates approximately 4,000 MW of electricity, a significantly insufficient amount for its population of 206 million. Chief Adelabu attributed this shortfall to various factors, including underutilization of power facilities and inadequate gas supply to power plants.

“I am amazed at the level of underutilization of these power installations. Each of them operates below 25 per cent capacity, when we are still complaining that power generation is low in this country. The under-capacity utilization is due to a variety of reasons,” Chief Adelabu said.

To address the underutilization and gas supply challenges, the Minister said there is a need for collaboration with the Minister of State for Petroleum (Gas). He proposed a roundtable meeting to ensure regular gas supply to power-generating companies and ultimately improve the operational capacity of the plants.

While acknowledging that the government-owned generating companies are currently undervalued, Chief Adelabu argued that necessary investments and improvements should be made before considering their sale. He cautioned against selling these assets in their current state, stating that it would result in losses for the country.

In response to the gas supply challenges, Chief Adelabu assured Nigerians of improvements in nationwide power supply in the coming weeks. He attributed the recent drop in supply to shortages in gas supply to power-generating companies and pledged that a major part of the debts owed to the companies would be paid down in the next couple of days.

However, the Minister’s call for a transition to a cost-reflective tariff raises questions about the financial burden on consumers and the broader impact on the economy. It will also play a crucial role in shaping the future of Nigeria’s power sector.

In a major regulatory development, the Central Bank of Nigeria (CBN) has introduced robust measures to enhance oversight and transparency within the international money transfer sector, adding to several other regulatory policies it announced recently.

The guidelines, officially released on January 31, 2024, outline stringent requirements for International Money Transfer Operators (IMTOs), signaling the CBN’s commitment to fostering a secure financial environment.

Minimum Operating Capital and Application Process

The cornerstone of the new guidelines is the establishment of a minimum operating capital requirement for IMTOs. Foreign entities must maintain a minimum operating capital of $1 million, while local IMTOs are required to meet an equivalent amount in the local currency. This move is aimed at ensuring the financial stability of IMTOs and safeguarding the interests of both the operators and the consumers.

Applicants seeking to operate in Nigeria are mandated to adhere to the CBN’s regulations on anti-money laundering, combating the financing of terrorism, and countering proliferation financing of weapons of mass destruction. These regulations, originally designed for licensing banks and other financial institutions, are now extended to cover IMTOs, underlining the importance of regulatory compliance across the financial spectrum.

To initiate operations, IMTOs must submit comprehensive applications to the director of the trade and exchange department. The application process includes a non-refundable fee of N10 million or an amount specified by the CBN. Additionally, applicants must furnish necessary documentation such as approval to operate in other jurisdictions, evidence of tax clearance, and incorporation documents for indigenous IMTOs.

Documentation Requirements and Transparency Measures

The documentation process also demands a clear understanding of the ownership structure of the IMTO, board approval to operate international money transfer services, and detailed profiles of the company’s board and management. To ensure financial soundness, the CBN mandates information on beneficial owners (BO) of the company, along with credit reports from licensed credit bureaus for shareholders and key officers.

These stringent documentation measures aim to enhance transparency, accountability, and regulatory compliance within the international money transfer sector. IMTOs are expected to provide ongoing information, documents, and reports specified by the CBN to maintain regulatory standards and keep the authorities informed about their operations.

Mandatory Annual Renewal Process

The CBN also introduced a mandatory annual renewal process for IMTOs, further highlighting its commitment to regulatory oversight in the financial sector. IMTOs are required to undergo the renewal process, subject to a fee of N10 million or an amount specified by the CBN, payable annually by January 31. This fee structure contributes to the cost of maintaining regulatory compliance and ensures the continued integrity of money transfer services.

Crucially, the renewal of IMTO approval must be completed within the first quarter of every year, emphasizing the CBN’s dedication to a timely and efficient renewal process. Failure to comply with this timeframe could lead to severe consequences for IMTOs, including potential suspension of operations.

To enforce strict compliance, the guidelines direct IMTOs to provide their agent banks with a copy of the CBN renewal for the current year within the first quarter. Failure to furnish this documentation would prompt the agent bank to cease any further transactions with the non-compliant IMTO, reinforcing the consequences of non-compliance.

Prohibitions and Aligning with BOFIA 2020

The guidelines explicitly prohibit banks from directly operating IMTO services; instead, they are authorized to act solely as agents. Financial Technology Companies have also been barred from obtaining approval for IMTO, aligning with the provisions outlined in the Banking and Other Financial Institutions Act of 2020 (BOFIA 2020).

These regulations extend the prohibition of certain individuals’ employment in banks to the realm of IMTOs. Shareholders and officers of companies involved in IMTOs are now barred from undertaking International Money Transfer Operations, ensuring alignment with BOFIA 2020 and its stipulations regarding the management of financial institutions.

Permissible Activities and Restrictions

The permissible activities for IMTOs are tightly defined, focusing solely on inbound international money transfer transactions. These activities include accepting funds for the purpose of transmitting them to individuals residing in Nigeria, cross-border personal money transfer services, and services for foreign tourists in Nigeria. Transactions are structured on a “person to person,” “business to person,” and “business to business” basis, subject to periodic reviews by the CBN.

IMTOs are expressly prohibited from engaging in any other business beyond the stipulated permissible activities. Outbound transactions and the purchase of foreign exchange from the domestic foreign exchange market for settlement are strictly off-limits, emphasizing the CBN’s commitment to maintaining the integrity of the financial sector and ensuring the security of money transfer services within Nigeria.