ELECTRICITY TARIFF REVIEW IN NIGERIA. WHAT IS THIS RAUCUS ABOUT?
As June 1st approaches, every media in the country is awash with news about the review in Electricity tariff in Nigeria. Depending on whom you are listening to, you get different opinion. Different newspaper shout different headlines, some showing the true state of affair and others screaming like we are about to witness the apocalypse. Some scream “tariff rise for the poor” while government retort with “ it's a tariff review” always at pain to stress that the poor will actually be better off.
The unanswered questions by many are:
- Are Nigerians paying very low electricity tariff compared to their counterparts from other parts of Africa?
- Are the poor going to be better off due to this review in tariff which the government claims it is subsidizing?
- Who benefits from this review and who actually is made to pay more?
- How can tariff review encourage investors to chip into the power market in Nigeria?
For answer these questions, I dived into the government MYTO document and really took a hard look at the new rate of tariff and the thinking behind it and what I saw gives me hope that we have a thinking government. Before you shout “Judas” please take a look at the document again which is found inhttp://www.nercng.org/index.php/document-library/MYTO-2/MYTO-for-the-Layman/
I found that the formulator of the policy had the urban poor and rural dwellers in mind and heavily subsidies it for the R2 category too.
The argument from the government side has always been that we pay one of the lowest tariff in the west African sub region. I asked myself how they got their figure so I dived into the website of The Union of Producers, Transporters and Distributors of Electrical Power in Africa (UPDEA). A body, which was established in, May 1970 and has its headquarters in Abidjan, Cote d' Ivoire.
In 2010, UPDEA published a document, which it calls “The comparative study of electricity tariffs in Africa” see
Click on the link above and you will see that Nigeria pay one of the lowest Tariff in Africa. (This tariff cannot attract investors. Infact anyone will be foolish to invest in the power sector with this tariff)
If this document is anything to go by, then it is near criminal for the government to allow electricity tariff to remain the same; especially for the well off.
Some argue that the government should increase supply before thinking of a tariff review. That is such a plausible argument but my response is “how”? It will cost billions to give us at least between 30,000 to 50,000MW Nigeria requires to get constant electrical supply. Do you know how much MW we are currently generating? Close to 4000 that's just 1/7th percent of what we actually need. This is after successive government has invested in electricity in Nigeria. Only private investors who want a healthy return in their investments can actually provide such an amount. No government the world over will invest that kind of money in generating electricity. So for those clamoring for an improvement in the power situation before a tariff review, think again. How can Government make such an investment when other sectors of the economy are crying out for handout too. Government can decide to allow the exiting status quo and hope investor's come (even my uneducated grandma can posit that no one will invest in the sector if tariff remains like it is) or take action now and make it attractive for investors
This government has demonstrated a willingness to get the power situation right. It is going about it the right way and I will show you why I think so.
Firstly, it appointed a round peg in a round hole; a proven academia and a power person in the person of Prof Bart Nnaji. I have followed his career closely and I know he talks, eat and sleeps power. If Prof Bart Nnaji does not get it right in setting us on the road to a more sustainable power situation in Nigeria, then am afraid there is little hope left. He is doing all the right things to get it right. I dare to hope to he will get it right. I believe time will prove me right
Now what is he is doing that will make me dare to hope: Firstly, His determination to ensure that government has no business in running power in Nigeria. I take a close look at Prof Nnaji and each time I do, I see a Nigerian who puts the Nation first before his own desire. How else can you explain a government official who is enthusiastic about allowing private investors to take over what other corrupt officials in his shoes would have resisted because to them, it would have been taking from them an opportunity to loot. He is going about passing the message in a dignified manner and he understands how it works.
Secondly, it decision to privatize the industry gives me joy. See what happens to the telecom industry. Imagine that happening to electricity supply in Nigeria. I can see the smile on your face. It will happen. I read somewhere that all the power plants had been bided for and winners will be announced in October. A Canadian company has also won the bid to manage transmission, The power sector has attracted investment from USIM and General Electrics and things are looking up. Contrast this with the administrations of the past and even a die hard critic will agree that this government is doing this differently.
Lastly, the Independent Power Projects and most of the power and gas projects been completed and on schedule. This will ensure that the power situation improves. Because the availability of gas will ensure that power plans operating below capacity will be fired to full power and this will result in more megawatt and that means that my a/c will run longer, I will watch tv for longer and children can do their homework more longer. I dare to hope.
MYTO for the Layman