POWER SUPPLY AND THE PRIVATE SECTOR
The country needs an efficiently managed grid and appropriate incentives to attract investment
The epileptic nature of power supply does not only make Nigeria one of the harshest environments to do business but also render the country less competitive. That has for years been a singsong of the Manufacturers Association of Nigeria (MAN) whose members now bemoan poor power supply and high cost of diesel as impacting negatively on their operations. The situation is compounded by the drastic reduction in gas supply to businesses and organisations through the Escravos Lagos Pipeline (ELPs) which has led to many job cuts.
As things stand, the promise that the reforms in the power sector would lay a solid foundation for sustainable power generation and service efficiency and would lead to increased access to electricity, engender private sector investments, improve infrastructure as well as create employment for the growing population of jobless Nigerians, has become a mirage. Major cities across the country, including the Federal Capital Territory (FCT), last week Sunday experienced a total blackout, following another collapse of the national grid. But that has become the new normal. From Kano to Calabar, Sokoto to Ibadan, indeed across the country, several days go by without electricity with its resultant effects on socio-economic activities.
Going by World Bank projection, businesses in the country experience an average of 239 hours of power outages every month with about US$0.20 to 0.30 per kilowatt hour (kWh) spent on self-generation. This accounts for nearly seven per cent of the business losses recorded by these enterprises that are now forced to resort to self-generation at a high cost to themselves and the economy. The situation, according to the World Bank, results in economic losses exceeding $25 billion annually to the country.
Analysis of firm-level data from the Nigeria World Bank Enterprise Survey indicates that electricity supply is consistently the biggest constraint to doing business in the country. Younger firms, exporters, and manufacturers, the report noted, are most likely to identify electricity access as a key obstacle to their productivity. Yet, having a reliable electricity supply is consistently associated with higher levels of economic productivity. Because the country’s power supply system is mostly unreliable, it does not just push businesses to seek off-grid alternatives or causes economic losses but also creates payment apathy by consumers who do not feel obligated to pay for electricity services they consider to be unreliable.
For a very long time now, the challenges of poor electricity supply and its attendant impact on businesses have headlined conversations in almost all economic summits or fora in Nigeria. But it is now time to move such conversations beyond meeting rooms. The shame is not only that Nigeria has the highest number of people without electricity worldwide, leading to about four per cent loss of Gross Domestic Product (GDP), but that we lag far behind other African countries.
It is irritating enough that the little megawatts of electricity generated in the country cannot be evacuated or distributed because of decayed infrastructure. It is even worse that nothing tangible is being done to remedy the situation – through the acquisition of good transmission networks for better power delivery. Despite billions of dollars in investment, Nigerians are still daily inundated with silly excuses about why they are in perpetual darkness. Instead of building trusts and working to light up the bewildering darkness in the land, both the electricity distribution companies (DISCOs) and the Transmission Company of Nigeria (TCN) are busy trading blame on their inefficiencies.
As we have repeatedly noted on this page, we need a robust and efficiently managed grid, appropriate incentives to attract necessary investment, and smart regulation to revive the ailing power sector in the country.
