THE CHALLENGE OF POWER SUPPLY

After more than two years of privatisation, consumers are paying more and getting less electric power

It is understandable that the Manufacturers Association of Nigeria (MAN) would express outrage at the hint of raising electricity tariff through a major review of Multi Year Tariff Order (MYTO). According to Reginald Odiah, chairman, MAN’s economic policy, such policy review would hurt the nation. “What we know, which we want them to know is that our budget is done yearly and any attempt to change the tariff of electricity to monthly or quarterly period will affect our budget and worsen the harsh economic situation,” said Odiah, “What we pay as electricity bills is outrageous. The electricity reform that we clamour for has failed.”

The frustrations of MAN are understandable. When in November 2013 the electricity distribution and power generation companies were handed over to some private operators at an elaborate ceremony, the hope was that daily blackouts and power outages would be reduced to the barest minimum, until they were gradually eased out. But it is now apparent that those hopes were largely misplaced. Today, consumers are paying more and getting less electric power. Indeed, energy costs perhaps account for the highest spending in many homes and businesses as Nigerians are largely dependent on generators as alternative source of energy.

Against the background that the economy cannot grow if there is no electricity to power basic industrial and domestic operations at reasonable cost, the outrage by MAN reflects the mood of the nation. That explains why the recent clamour by the electricity distribution companies (Discos) for a raise in tariff is being met with resistance. But the Discos have also insisted that the tariffs paid by customers are not cost-reflective.

This was accentuated by their disagreement with the electricity generation companies (Gencos) over the planned centralisation of their accounts. The federal government had threatened to centralise the accounts of the Discos over their inability to fulfil their monthly remittances to the Nigerian Bulk Electricity Trading Plc (NBET), accusing them of remitting only 30 per cent of their monthly energy invoices. Meanwhile, it was the same consideration which influenced an earlier plan to hike electricity tariff by 45 per cent in 2016, but was shot down because of stiff opposition from the public.

It is not clear if the provisions of the act are taken into consideration in the current contemplation to review the MYTO. But given the worsening services being provided by the Gencos and the Discos, raising the tariff will be an uphill task. One of the major grouses of those opposed to the tariff structure is that Nigerians are being billed for what they do not consume.

While about 60 per cent of electricity consumers are billed exorbitantly and arbitrarily since they are not metered, there is no assurance that a new hike in tariff will translate to improved services. Only last week, the Minister of Power, Works and Housing, Mr. Babatunde Fashola admitted that even though the country now generates about 6000 megawatts of electricity, the highest at any point in time, much of it could be evacuated because of decayed infrastructure.

That perhaps explains why Nigeria has one of the harshest environments for doing business. China, for instance, spends less than 10 per cent of its production cost on electricity. In Nigeria, it is in excess of 40 per cent as individuals and businesses have had to resort to self-help through an assortment of generators. Yet, as we have noted on this page, we must reiterate that price hike alone will not reform the sector. We need a robust and efficiently managed grid, appropriate incentives to attract necessary investment, and smart regulation. Above all, the very source of the huge distortion in the sector must be attacked by metering all consumers.