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New Light On Old Darkness

New Light On Old Darkness

The Nigerian governments decision to announce new more expensive electricity tariffs from the beginning of June has provoked a spate of protests. Nigerians believe this is putting the cart before the horse as the country’s power supply remains woeful.

Nigerians believe the government should have addressed the deteriorating power supply situation in the country before it went ahead and announced an upward review of tariffs. More than a year after incumbent President Goodluck Jonathan assumed the reins of office, aggregate national power output still hovers around 4,000MW, a far cry from the projected 10,000MW. This has forced Nigerians to rely on auxiliary generating sets for alternative power with resultant cost and health implications.  

But the government insists that the policy is necessary because it will attract investors to the power sector. At the last count, over 100 investors from the US, Europe and India had indicated interest. The Nigerian tariff, the government points out, was until now the cheapest in Africa and as such was largely uncompetitive. In Ghana and Benin, for instance, the rate is $0.16 per kWh) and in Benin and Chad  $0.18/kWh.

Nigerians, it adds, must be ready to pay more to get adequate power supply. The government maintains that the tariff is carefully structured to reflect realistic pricing that will guarantee private sector investment in the generation, distribution and transmission of electric power in the country, adding that the tariff will ensure steady power supply and enhance customer delivery. The government further said it was reviewing tariffs in accordance with the Electric Power Sector Reform (EPSR) Act 2005, which empowers the National Electricity Regulatory Commission (NERC), to review tariff upward or downward, in the interest of all stakeholders.

A pro-poor policy

Despite misgivings about the new tariff, the government has ensured that it will benefit the ordinary Nigerian. For instance, under the new tariff, rural consumers and the urban poor, who do not use heavy electronics, will pay $0.027/kWh instead of $0.047/kWh, while the more affluent, classified as individuals, commercial and industrial consumers, will pay between $0.073 $0.16/kWh, depending on location, in line with the new government cross-subsidisation policy where the rich will fund the poor.  However, unlike the nationwide strike that greeted the removal of the fuel subsidy regime in January, Nigerians did not take to the streets this time. The enlightenment campaign embarked upon by the government before the scheme took off may have dispersed the brewing storm. The government also announced a N100bn ($670m) stabilisation fund to subsidise the cost to be borne by consumers rated below the N24/kWh cost of production over the next two years. The chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr Sam Amadi, who confirmed this, however said the subsidy for 2012 is only applicable to consumers categorised as low income earners.

The NERC Chairman envisages that a stable and improved power supply will revolutionise the economy as small businesses will rely less on generating sets. It will also significantly reduce cost of doing business, reducing the cost of goods and services.

Defending the government’s position, while fielding questions from the nation’s lawmakers in Abuja, who had summoned him shortly before the scheme took off, Nigeria’s Power Minister, Prof. Barth Nnaji, said appropriate pricing is one of the conditions for attracting the much-needed investments in power. He attributed the poor performance of the power sector over the years to lack of a cost-reflective tariff.

Nnaji said: “The tariff framework provides incentives for improving performances, cost reduction, and quality of service. However, tariff rebalancing is only a part of the equation and can only work in tandem with the current reform/privatisation programme.”

Despite the hue and cry, he said the new tariff offers Nigerians a lot of benefits. For instance, existing customers who do not own meters need not pay for one any more as the cost of acquiring meters is included in their tariffs. New customers will only pay a standard connection fee with no additional charges for the meter. Based on these and other benefits he enumerated while addressing the House of Representatives, the Minister submitted that the increase in tariff was “important and very necessary in improving the sector for investors to come in” .

Nnaji is quite familiar with the terrain, having established Geometric Power, the first indigenous private sector power company in Nigeria with a capacity of 140MW, only a few years ago.Nnaji has so far demonstrated that it is no longer business as usual in the electricity sector as he sacked three top bosses of the Power Holding Company of Nigeria (PHCN) earlier in the year over what he perceived as lacklustre performance.

Nnaji’s task is no doubt a daunting one as it has been reported that 23.73m households out of the 28.9m in the country (or 82.1% of Nigerians), do not have access to the national electricity grid. This was one of the findings of a committee set up by NERC to probe the power sector. The committee, headed by Lagos lawyer, Bamidele Aturu, also noted that Nigeria requires about $335m to provide meters for all electricity consumers. Aturu’s report further confirmed the shenanigans of some unscrupulous PHCN workers who take advantage of the grossly insufficient number of meters in the country to charge customers by estimation, creating an avenue for overbilling. The new tariff regime is expected to address this as it is envisaged that all electricity consumers will have their own meters within 18 months.

Energy-saving bulbs launched

As part of measures to alleviate the effects of the new policy, President Goodluck Jonathan launched a campaign of providing energy-saving bulbs for use in the country. He chided some Nigerians over their attitude towards public utilities. He said the introduction of the slightly more expensive bulbs would reduce the amount of energy that Nigerians were consuming by as much as 80%.

Jonathan also unveiled plans to roll out incentives to encourage local and foreign investors to commence local production of the energy bulb soon. He said this was in line with global trends where conventional bulbs that emit much heat are being gradually phased out and replaced with the ones that save energy. A growing number of countries are changing to the four-watt energy saving bulbs, which are reputed to be safer and reduce health hazards, in place of the heavy energy-consuming 40 and 60 watt bulbs. Jonathan said Nigeria should not wait until it gets its power supply right before joining the rest of the world in the use of energy bulbs.

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Written by African Business Magazine

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