THE HIKE IN ELECTRICITY TARIFFS

Will the raised tariff lead to improved service delivery?

By virtue of the Utilities Charge Act, the National Electricity Regulatory Commission (NERC) is empowered to evaluate trends in tariffs with a view to providing the federal government information as would assist in determining permissible increase. While a cost-effective tariff may be the only way to serve that core value chain–from generation down to distribution–the controversial tariff regime categorised under ‘Band A’ announced last week has continued to elicit outrage. In major cities across the country, Nigerians are complaining about the rates, especially when there has been no improvement in power supply. There is also no record of an upgrade in infrastructure or investment in the weak electricity distribution network before this latest hike.

Going by the new tariff structure, the affected consumers will pay a hefty N225 per kilowatt-hour, up from the previous rate of N68/kwh, an increase of about 240 per cent. While those affected were said to be enjoying up to 20 hours of electricity supply daily and constituting about two million of the total 13 million consumers, it turned out that there was a blanket implementation of all consumers, especially in Abuja. Although NERC has imposed a fine of N200 million on the Abuja Electricity Distribution Company (AEDC) and ordered a reversal for some consumers, it is also clear that the whole policy was not well thought-out, given the lame explanation provided by the Minister of Power, Adebayo Adelabu last Friday.

With less than 4000 megawatts of electricity serving more than 200 million people, and a national grid that collapses at will, the crisis in the sector has become more acute and apparent. But there should be a more coherent plan for the sector beyond hiking the tariffs that seems to be the only idea Adelabu has. While we subscribe to the argument that people and industries should pay for the power they consume, some pertinent questions remain: Will this increment yield good outcomes in terms of improved service delivery? Will it resolve the many aching problems associated with electricity supply in Nigeria? Besides, at a time Nigerians are being made to sacrifice in practically all areas of our national life, political office holders (from the president to governors and lawmakers) are still living large at the expense of the people.

The current administration must understand that a cynical approach to a serious problem will not work. Recent analysis of firm-level data from the Nigeria World Bank Enterprise Survey showed that electricity supply is consistently the biggest constraint to doing business in the country. Instructively, Nigeria has one of the harshest environments for doing business and makes the country less competitive. China, for instance, spends less than 10 per cent of its production cost on electricity. In Nigeria, it is more than 40 per cent, as individuals and businesses have had to resort to self-help through an assortment of generators.

Across the country, there is hardly any part that does not suffer from power failure on a regular basis. Those in the rural areas and sub-urban majority are mostly locked out, with resultant impact on socio-economic activities. All the promise of injection of new capital, technical knowhow, improved infrastructure, and managerial dexterity have all turned out to be a mirage. Indeed, a former Minister of Works and Power, Babatunde Fashola openly accused the generating companies (Gencos) and the distributing companies (Discos) of the same managerial incompetence and corruption which riddled the discredited Power Holding Company of Nigeria (PHCN).

In the face of fitful electricity supply, individuals, and businesses resort to generating their own power. Yet privately generated electricity also comes at a huge cost. Lack of electricity has over the years limited access to healthcare, education, and other opportunities.

Many small and medium scale businesses have been crippled due to the prohibitive cost of generating their own power. Even the big business ventures, particularly the manufacturing ones, are also feeling the biting effect of energy poverty with consequences stretching to every part of the economy. 

 Given the foregoing, we are not opposed to cost-reflective tariffs. But the process of billing should be measured, transparent and efficient.