Forex, interest rate hunt hospitality sector in Nigeria

There is increasing fear over the delay in the growth of the hospitality sector due to the combinations of factors including devaluation of Naira and high interest rate from financial institutions in the country. OREDOLA ADEOLA, in this report examines the impact on the sector.

The hospitality industry is another major sector in the country’s that has been negatively impacted due to recent devaluation of Naira by the Central Bank of Nigeria, CBN, which fixed dollar at N199. This has also been made worse by the tightening of the interest rate for long term lending by financial institution for private firms.

While investors in the sector have continued to lament due to fear of losing their investments as a result of inability to access finance to bankroll their projects, analysts have also speculated that the sector may witness a delay in the 2000 hotel rooms projected for 2015 and 2017. According to them, if the issues are not urgently addressed, investors in the sector may lose confidence in expanding their business which may further lead to retrenchment and capital flight.   

According to Ms. Damilola Adepoju, a hospitality industry consultant for W Hospitality Group, a tourism consultancy firm, only thirty-eight per cent of the hotel rooms that are reported to open in 2015 are under construction. She said that, what the situation portends for the sector is that most of the hotels planned for 2015 will not open on schedule and will be delayed by one or more years.

She further stated that Nigeria with 6,614 rooms in 40 hotels, being the highest number of hotel rooms in the pipeline in Sub-Saharan Africa, will face crisis because of the present economical realities leading to delay in delivering of the projects.

In her analysis of the hotel deals by region and by construction status, she revealed that North Africa has commenced 75 percent construction deals signed deals while against the 63 percent in Sub-Saharan Africa, where Nigeria leads. she further revealed  that no work is ongoing in the various sites of over ten hotel projects in Lagos alone, adding that with this kind of situation, most of the hotels planned for 2015 will not open on schedule and will be delayed by one or more years. She noted that  the delay in expansion of the various hotels work in the pipeline across the country could lead to over-pricing of the available rooms, especially when the demand is high.

Hallmark gathered that the 2016 target for the completion of the 250-room Hilton Lagos Airport hotel and the Starwood’s Luxury hotel at Ikoyi which started in 2012 may be delayed due to funds. The Four Points by Sheraton Ikeja has also been abandoned, while the proposed Starwood hotel located in Victoria Island has been released to a real estate developer to convert to luxury apartments.

It was revealed that, the Movenpick in Abuja, has been abandoned because the developer is having challenges with the bank, which insisted on reviewing the contract because of the economic realities and new Central Bank polices, while an attempt to kick-start a mid market Starwood brand in Port Harcourt is stalled by funding.

Now under Marriot, many Protea hotels in the pipeline are still facing funding issues, as well the Golden Tulip brand that devised to review its franchise and branding deal if project developments linger unnecessarily.   

The report said “Although these hotel deals have been signed by the hotel chains, this does not always mean that the hotels are actively being built, or are even on site. In deed one cannot be certain that the hotel deal will actually be open by the indicated completion date, or even at all. This is unfortunately the norm in the African business environment, where development programmes tend to have much longer durations than are originally planned.”

According to a financial expert, Dr. Boniface Chizea, 25 per cent interest rate is not sustainable and inimical to the prospects of the hospitality sector. He said “Recently Nigeria have concentrated attention on stopping the hemorrhaging of the reserves that in response to the reverse capital flow as result of the cascading oil price and general election related uncertainties. The country hiked the Monetary Policy Rate by 100 basis points from 12 to 13 per cent with expectation that confidence will soon return to the economy as the oil market stabilizes and as the general elections are successfully concluded.

It is critical for policy makers, to look into the various decisions taken in panic mode and do the right things. The Monetary Policy Rate-MPR must be revised downwards before long which will signal movement of cost of borrowing in the desired direction. The inflation rate at about eight per cent would imply that we have considerable headroom for the reduction of interest rates, but we must not expect that this desired reduction in interest would happen overnight.” He said.  

He further suggested that for any meaningful result to be achieved over the medium to long-term the government must remain focused. According to him, the financial sector must be responsive for interest rate to be reduced in the economy despite the high cost operating environment coupled with the desire for competitive profitability.

In his reaction, Mr Akingbogun Tomi, President, Federation of Tourism Association of Nigeria, FTAN, said that the issue with high interest rate has been a major factor affecting the growth of the hospitality sector. He said that the situation has further discouraged investors in the sector. He alleged that CBN and most of the commercial banks are not willing to provide finance for various work in the sector.

“Other countries including United Arab Emirates, UAE, Ghana and South Africa are doing lower interest rate for investors while Nigeria banks have deliberately continued to kill the industry. Most Nigerian investors have taken advantage of cheaper funds available in these countries to establish hotels at the expense of their own country.

“How do we develop the industry when the government is not interested in the plight and challenges of the investors in the country? Everyday hotels are shutting down while others have retrenched their staff in order to cut cost. The devaluation of naira has affected the psyche of investors as most of them prefer spending in dollars without respect for the country’s currency” he said.

Picture of an uncompleted five-star hotel in Nigeria

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FG Inaugurates NIPP Olorunsogo, Ogun State

President Goodluck Jonathan on today inaugurated the 750 megawatts Olorunsogo II Power Station, Olorunsogo, Ifo Local Government Area, Ogun. According to the President Jonathan, the government has invested about 8.26billion dollars in the power sector through the National Integrated Power Project (NIPP)‎.

He further explained that a total of 650 million dollars‎ of the amount was committed to the Olorunsogo power plant, out of about ten of such power projects ongoing across the nation,

He had earlier inaugurated two power plants in Kogi and Ondo states in 2014. President Jonathan further hinted that the Egbin power station would also be inaugurated on Saturday.

“The 750 Megawatt Olorunsogo Phase 2 Power Plant will be to the benefit of Nigerians. It will provide additional electricity to power the ongoing Transformation of Nigeria from the largest economy in Africa to a top 20 global economy. It is the goal of this administration to ensure that we work with all Nigerians to provide the infrastructure our nation needs to fulfill her remarkably great potential

He said that his administration would not relent in its determination to drive away darkness from Nigeria. “With this development, I have consistently delivered on my campaign promises to transform Nigeria and my administration would leave no stone unturned to achieve its goals,” he said.

He however pledged that the interface between the government and the private sector on the privatisation of the power sector would be completely sealed by 2017. He said that the power plants in Kogi and Ondo states had already been privatised, while that of the Olorunsogo is in the process of being privatised.

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Electricity consumers lose hope in NERC, DISCOs … call commission a toothless bulldog

With the myriad of challenges bedeviling the country’s power sector even after the privatization of the sector, electricity consumers have expressed disappointment over the regulation of the activities of the distribution companies  due to unwholesome acts being perpetrated in the sector, ADEOLA OREDOLA, in this report, examines the grouse of the consumers .

Dr. Sam Amadi, Chairman NERC

Years after the unbundling of the government stake in the ownership of the power sector, Nigerians are fast losing confidence in the entire process, due to the unwholesome activities of the various players in the power sector. They condemn the abysmal performance of the player after years of anticipating the gains of the privatization programme. The reason given for this is the lack of policy framework and sincerity on the part of the present administration in ensuring proper monitoring of the various value chains that make up the entire system. 

Stakeholders in the sector, have complained that the electricity operators have flouted the order of the Nigeria Electricity Regulation Commission-NERC, over the distribution of prepaid meters to the electricity consumers. They also noted that despite opportunity given to DISCOs to improve on their services, issues with crazy bill, uninstalled meters after purchase, poor customer service as well as nonchalant attitudes of some officials of the companies have still not being addressed. They said that despite the N213billion power intervention funds, provided to the players by the Central Bank of Nigeria- CBN, in meeting their infrastructural challenges and boosting their capacity in the sector, the DISCOs have not really live up to the expectation.

According an aggrieved customer who spoke with Hallmark, Mr. Olaoluwa Adedeji, more than half of the entire consumers have not been fully metered, while different parts of the country have been subjected to darkness despite exorbitant charge. He said “As I speak some areas in the country have not seen power in the past eight months due to transformer shut down and obsolete cables. Those who have paid for the Credit Advance Payment for Metering Implementation (CAPMI), have not been metered owing to various technical and logistics issues raised by the distribution companies and their vendors.” exclaimed

According to an energy expert, Olubunmi Martins, the take-off of the Transitional Electricity Market (MET), which commenced this month, may not be able to address the salient issues within the sector. According to him, the policy which is expected to usher in a disciplined electricity market, will not achieve much, because of the complication in the transaction between the government and private organizations that bought over the assets.

Olubunmi also said that it would be very difficult for Minister of Power and NERC to discipline the power firms, because the power assets were sold to powerful individuals in the country, who may be difficult to control or sanction.  

One important question that stakeholders and consumers have continued to ask is the issue with the metering system. They sighted the failure of the Multi Year Tariff Order (MYTO) which led to the introduction of the Credit Advance Payment for Metering Implementation (CAPMI), as a form of intervention scheme to allow DISCOs accept a refundable advance payment from willing customers for metering.  They also allege that NERC has continued to play lip service to enforcing discipline on the DISCOs and Generation companies in the discharge of their duties to the masses.

Hallmark further gathered that despite the certificate given by the commission to 5 manufacturers, 13 importers, 28 vendors, 4 individual installers and 79 corporate installers, that make up the Metering Service Providers (MSP), local manufacturers of meters have alleged complete marginalization by the Discos with claim that over N9.5billion worth of local meters were ‘wasting’ in warehouses across the country, because the DISCOs prefer imported meters than the locally made ones.

Also, the January 1, 2015, kick-off of the revised Multi Year Tariff Order (MYTO) 2.1, regime approved by NERC, with the assurance of holding electricity distribution, transmission and generation companies to the terms and conditions of their licenses, had also been characterized with poor implementation. While the MYTO was expected to address issues with increase in electricity tariff, consumers still pay more than double for the services not provided, without commensurate improved services.   

At the nationwide consultations organized by NERC, Dr. Amadi, with electricity distribution companies and stakeholders on Aggregate Technical Commercial and Collection loss, The chairman issued worded warning to DISCOs who had denied electricity consumers of meters after they had paid for the equipments, with promise to punish and sanction any discos found wanting.  

Industry watchers have revealed that the various ultimatum issued by the NERC Chairman on the closing of the metering gap had fallen on deaf hear. They believed that NERC has given the DISCOs the latitude to justify their exploitation of the consumers as they are being treated with kid gloves. They said that the concerted efforts of the present administration to stabilize distribution of electricity in the country would continue to be jeopardized going by the different empty threat by the commission. After all, the different ultimatums have been given by the commission; no DISCOs have been punished over non compliance to its order.

 In the area of the arbitration of the consumer right, Mr. Adeolu Ogunbanjo, president, Consumer Rights Advancement Organisation (CRADO) on his part has condemned the non-supply of electricity meters by the distribution companies despite the huge deposit of standard meters produced by local manufacturers. According to him consumers have managed to accommodate DISCOs’ inefficiency to the extent of tolerating “crazy billings and very high estimated bills being served on monthly basis.”

 He claimed to have taken the matter to industry regulators and stakeholders — including the Federal Executive Council, the National Assembly, the Nigerian Electricity Regulatory Commission (NERC) and the Electricity Distribution Companies (DISCOs) — without any positive outcome.  Also in one of the NERC forum, organized in Ibadan, Dr Babajide Taiwo, chairman Ibadan Arbitration forum, has berated some of the DISCOs over ineffectiveness and poor service delivery. He said that despite several attempt by the forum to address issues customers complaints, the reaction of the distribution companies to petitions of the customers still falls below standard. According to him, electricity consumers needs to make their complain known through the various arbitration forums in their area, while also taking advantage of the various mechanism available to lodge their complaints.

Recently , the Chairman of Egbin Power Plc, Mr. Kola Adesina, in his reasons why some of the distribution companies have not been patronizing the local manufacturers, he said that the operators have issue with installing meter that cannot evaluate the use of electricity by consumers. According to him, metering models produced locally have failed to ensure proper metering system. 

He said “You don’t just install meter that cannot speak to the various infrastructure relevant for monitoring and evaluating how electricity is taken and how it is being used by the consumers. As it is, we have a lot of free riders in the system, free riders that will naturally connect to the pole, use electricity and not pay for them.” Adesina further explained that the concern of the GENCOs and DISCOs at the moment is to know the quantum of electricity that comes from the transformers and the number of homes connected with electricity.

“What we are doing currently is at each point of the transformers before the homes; we want to measure precisely the quantum of electricity that comes out of the transformer and the number of homes it is going into. At the end of the day we would to be able to precisely determine in our own office, sitting down in our control room that house number A is meant to use X quantum of electricity, it is using X quantum.“The moment it starts to use something higher, it means you are no longer a residential user, you are now an industrial or commercial user and you must be able to pay the appropriate tariff for the quantum of electricity you are using,” he said.

He also said that the aim is to get the exact voltage that gets to every customer. “The essence of what we are doing is to have an integrated approach, whereby we can capture the electricity that comes from the transmission company and electricity that goes out to each of the customers. All these will be embedded in the metering programme we are installing,” he added

However, record of the level of compliance of the distribution companies to the effectively meter their consumers shows that , the Ibadan Electricity Distribution Company (IBEDC) has only succeeded in metering 62 percent(711,986 consumers) against 38 percent (431,743 consumers) who are yet to be metered. Also the Abuja Electricity Distribution Company (AEDC) has only metered 404,990 customers against 332, 545 customers.

 The Eko Electricity Distribution Company, EKEDC, has blamed the delay in the rolling out of prepaid meters to consumers on the fear of bye-pass of its meter. NERC has also blamed Ikeja Electricity Distribution Company, IKEDC and Enugu Electricity Distribution Company, EEDC, for poor performance in the distribution of the CAPMI.

While consumers have continued to bear the burden of the country’s malfunctioning electricity market, they have charged the present administration to force the ministry of power and NERC to sanction the DISCOs that may have flouted the order of government. Nigerians are continued have continued to look forward to a time when they will get full value for the electricity bill they pay.

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Nigerian travelers cancel trip to Dubai ... as experts confirm ban, advocate travel advisory

 Travel agencies in the country have laid to rest the controversy generated over the purported visa restriction imposed on foreigners below the age of forty, which has led to a scare among intending visitors. ADEOLA OREDOLA, who spoke with some of the prominent travel agencies in this report, writes

The information that the United Arab Emirates- UAE, has banned single and unmarried Nigerians who are less than forty years old from visiting the country may have prompted some intending travelers to Dubai, who fall within the age range, to cancel their trip to that country due to the new travels restriction. The rule as confirmed by travel agents says that the individual will be denied visa, except the person is accompanied by someone who is above forty and bears the same surname with the individual.

While confirming the authenticity of the purported restriction, travel agencies in the business of arranging visa for travelers to Dubai have defended the new restriction. According to them, the visa rules is not limited to Nigerian travelers alone as other Africa countries including Morocco, Algeria, Libya, Mauritania and Tunisia are also affected.

Mr. Chike Nwogu, Manager, Bespoke Vacations, who confirmed the new rule, said that UAE visa application is not as strict as it is being circulated. He added that all issues relating to visa application must be sponsored by an accredited Dubai Destination Management Company (DMC), saying that most travel agencies in Nigeria often apply for visas through various DMCs while some offer seamless services that may not necessarily requires strict rules.

According to him, until last week, his company had arranged visas for applicants within the age range. He said that, the restriction does not affect all the agencies as it depends on the agreement between the agency, hotels and DMCs in Dubai.

He noted that “This new policy does not apply to us, because we usually apply for visas through a state owned DMC. Contrary to the purported information, our company will continue to get visas for intending Nigerian passport holders irrespective of their age until we are directed to do otherwise.”

In his reaction, Mr. Edwin Omobude, who is a spokesperson for Netcross Travels, an accredited agency, confirmed that the purported restriction order by the United Arab Emirate government is real. He said “we are yet to get official notice from our partner in Dubai, but based on the information from sister agencies in country, some applications have been turned down, as a result of the age of the applicants. According to him, the new visa rule has been upgraded from twenty above to forty years due to the conduct of some of the affected persons whenever they are given access to Dubai.

He confirmed that the new sanction has affected the travels agencies in the country because majority of the intending travelers have been forced to cancel their business and leisure trips to Dubai, since they could not meet all requirements. According to him, travelers need proper travel guides as the restriction order is not as strict as it is being construed. He said “Dubai visa is easy if all the basic travels guidelines are being complied with. We have continued to offer travels advice to some of our clients in order to calm the fear.

Reacting on the development, the Chief Executive Officer, Go-Places Travels & Tours Ltd, Chief Festus Ogbugbe, confirmed the travel rule. According to him the order only affects applicants  applying for only two weeks, as it is not binding on the monthly visa. He further stated that the new development has not really impacted much on its operations.

According to the information from, UAE government through the Ministry of Interior, crime rate has fallen by eighteen per cent due to strict and effective security measures put in place by the security operatives. It said that due to the recent review of some of the rule, UAE recorded about twenty per cent decrease in bounced cheque cases in 2014 compared with 2013. Other crimes attributed to foreigners by the country includes, Automated Teller’s Machine scam, robbery, smuggling, prostitution and drinking while driving, taking of pictures of strangers, sunbathing in skimpy clothing amongst other related crimes.

In its advice to tourists, the government said that visitors are warned to avoid improper conduct or inappropriate behaviour that could lead to fines, imprisonment and deportation. It also said that the culture and laws in the country are designed in such a manner to safeguard personal freedom on the one hand and to ensure that everyone including tourists respect each other regardless of their faith and nationality.

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