Nigerians Grapple with Unrelenting Power Outages

As the frustration and disappointment of Nigerian electricity consumers get to a tipping point, Festus Akanbi, in this analysis says government excuses for the uninspiring performance of power sector operators cannot appease the Nigerian people who are incurring heavy losses due to the frequent power failure in the country

No matter which direction one turns to, the narration on the economy is dominated by cries of anger, disappointment, and frustration as Nigerians grapple with deterioration in the frequency of power supply to homes and offices.

To many Nigerians, the nation’s power generation has slipped to the pre-privatisation level as blackouts persist in various parts of the country.

Apart from the frequent collapse of the national grid, which plunges the nation into darkness whenever it occurs, electricity consumers say that the failure of the various distribution companies to refurbish their assets has created a scenario where discussions at homes and offices now revolve around lamentation over frequent power failure.

Sadly, despite several interventions in the power sector by the federal government, power sector operators have not been able to meet the needs of Nigerians.

In response to the agitation for an upward review of tariffs by the distribution companies, the Nigerian Electricity Regulatory Commission (NERC) on April 3, 2024, raised electricity tariffs for customers enjoying 20 hours of power supply daily.

Customers in this category are said to be under the Band A classification. The increase will see the customers paying N225 kilowatt per hour from N66, a development that has been heavily criticised by many Nigerians, considering the immediacy of the tariff hike and the current hardship in the land.

Business as Usual

A few weeks after the new price regime took effect, consumers said nothing had changed as businesses, especially in the Band A area have to rely on other sources of power. This is the experience of residents of high-brow areas of Ikoyi, Victoria Island, Lekki, and Ikeja areas of Lagos, where generators noise disturb the neighbourhood nights and days.

Reports say the situation is not different in other parts of the country.

Speaking on the development, the Nigerian Electricity Regulatory Commission’s Commissioner for Planning Research and Strategy, Yusuf Ali, thinks it’s unfortunate but also understandable the circumstances facing Nigerians.

“I think the current review is seen as part of reforms that are not so easy to accommodate now but I want to that this tariff review is focused on only 15% of the customer base.

“The difficulty on the government is very clear; the cost of producing electricity is always going to be there, the only question you have to ask yourself at any point is who foot the bills. All around the world, three reviews in four years, considering the scale of the macroeconomic changes we’ve had in our economy, don’t go anywhere near enough. So, for way of context before this review, we were operating a tariff that was determined in December 2022.”

From Hands to Mouth

However, critics of the arrangement in the power sector believe the problem started with the power sector privatisation ab initio.

 There is the argument that power distribution is falling as a result of the failure of the various discos to invest in the area of critical assets.

“The truth is that owners of these firms decided to rely on revenue from operations for the funding of the business. Most of them didn’t bring in money from investors but decided to plow the revenue from operation to the business, which explains the current insufficient funds to meet the challenges on the ground,” a power sector analyst said.

In what looks like an official confirmation of the lack of the needed financial muscle to deliver regular electricity supply by the Discos, the Chairman of the Nigerian Electricity Regulatory Commission (NERC), Sanusi Garba, last week argued that most of the Discos operating in the country are currently insolvent.

To that extent, he noted Discos are unable to pay for invoices sent to them from the electricity market and invest in network expansion projects, explaining that the poor financial state of the Discos makes it difficult for them to raise the needed capital to invest.

The NERC boss pointed out that the challenges facing the sector were a culmination of all past inactions and missteps by those saddled with the responsibility of managing the sector both at policy and operational levels.

“Today, when you look at distribution companies, they are clearly and technically insolvent, and you also want them to raise capital in terms of debt or equity. It’s a herculean task.

“I also want to mention that implementing the power sector reform requires very strong political will to implement decisions that impact the wider public,” Garba maintained.

In the same vein, the Minister of Power, Chief Adebayo Adelabu, has hinted that a form of intervention has been approved for the power sector beginning with the payment of about N130 billion in the first instalment.

The minister explained that the government was working to get the distribution companies solvent and effective by unbundling their operations along state boundaries, insisting that their areas of coverage were too large for them compared to the Discos’ capacities.

“Mr. President has approved the submission made by the Minister of State Petroleum (Gas) to defray the outstanding debts owed to the gas supply companies to power generation companies.

 “The payments are in two parts, the legacy debts and the current debts. For the current debt, approval has been given to pay about N130 billion from the gas stabilisation fund which the Federal Ministry of Finance will pay.

“The payment of the legacy debt will be made from future royalties in exchange for incomes in the gas subsector which is quite satisfactory to the gas suppliers. This will allow the companies to enter into firm contracts with power generation companies.

“For the power generation companies, the debt is about N1.3 trillion and I can also tell you that we have the consent of the president to pay, on the condition that the actual figures are reconciled between the government and the companies.

“This we have successfully done and it is being signed off by both parties now. The majority has signed off and we are engaging to ensure that we have 100 per cent sign-off.

“The debt will be paid in two ways, immediate cash injection and through a guaranteed debt instrument, preferably a promissory note. This assures the companies that in the next three to five years, the government is ready to defray these debts,” the minister stated.

To cure Nigeria of its incessant electricity challenges, the federal government in 2013 carried out a partial privatisation of the power sector. This means that today, only the transmission segment is still tightly under government control.

But despite that action, including pumping money into the sector in trillions, there appears to be no marked improvement. If anything, what has changed is perhaps the nomenclature of some of the institutions in the sector.

Consumers Rate Discos Low

Consumers argued that rather than making excuses for the industry stakeholders, the regulators were supposed to have been hard on the Discos for transferring their responsibilities to consumers. There are complaints that in their desperation to enjoy power supply, consumers have continued to be responsible for the purchase of transformers, electric poles, and wires, among others.

There were also allegations that the management of a particular Disco deliberately turned down power from Gencos in an attempt to avoid payment whereas the consumers under the disco’s captured areas were expected to pay for electricity not supplied.

The federal government has also recently acknowledged the drop in Nigeria’s total electricity generation from an average of 4,500mw to just over 3,000 in recent weeks, stressing that it was doing everything to resolve the issues.

Most sector players believe that a cost-reflective tariff regime will significantly turn things around in the power sector. 

The Chairman of the board  Of Directors of Mainstream Energy Solutions Limited, Sani Bello, believes that the absence of a cost-reflective tariff represents a major challenge that must be addressed to provide sustainable liquidity for the entire value chain.

But analysts insist that unless the government can step up regulation, the anticipated cost-reflective tariff won’t make any difference in terms of the quality of service delivery.