In a recent interview with the Nation newspaper in Nigeria, Governor of the Bank of Nigeria, Godwin Emefiele discussed the issue of electricity tariffs in that country. Emefiele has weighed in on the conversation, saying that Nigerians must be prepared to pay more for electricity, according to Simeon Ebulu, group business editor of the Nation.
Emefiele spoke extensively about the global downturn in commodity prices and the effect of global geo-political tensions on a variety of economies.
At the recent World Bank/IMF meeting held in Lima, Peru, the decision was made to revise growth across a number of African countries, with the result that growth projections have been revised down from over 5% to 4. 25%
The solution to this is for countries affected by the downturn, especially those reliant on commodities, to diversify their economy away from ‘oil and commodity prices’.
The African caucus meeting discussed a number of issues, including a commitment by the World Bank and IMF to assist Nigeria in particular, in raising finance for infrastructure projects.
Effect on tariffs
Emefiele further said that inflation and exchange rates affect tariffs.
“That is why we are doing our best to see to it that we keep inflation under check, and that is why we have been (I use the word stubborn) in even adjusting the currency further, and you will notice that in the last eight months, we have achieved so relative stability in exchange rate, and that will continue. But I also read in the papers that we are not going to continue to enjoy the tariffs that we have seen so far.”
Emefiele continued: “For you to have good electricity supply, you need to pay a little more, and the truth is that, if we compare the cost of generating our own electricity using our generators, with the cost of using the existing distribution companies’ grid, you will find out that what we spend on generators is significantly higher than the cost [per] kilowatt hour, using the DISCOS. For example, using your generator costs as much as N80/kilowatt hour, and today, using your DISCOs, you are paying less than N20/kilowatt hour in some of the cases.
“What we are saying, is, even if you have to pay a little more so that you can throw away your generator, pay a little more so that you can have more electricity, and I think it is worth it. These are some of the policies that the NERC is putting in place to support what is called the Cost Reflective Tariff. But I can assure everybody that whatever that cost reflective tariff turns out to be, it will still be substantially lower than the N80/kilowatt hour spent today on our generators.”
Emefiele went on to highlight that there have been improvements in generation, although he agreed that wheeling capacity was limited. He reiterated that discussions around investment into he transmission grid were ongoing and that the CBN would continue to engage with this topic.
“The funds were provided to distribution and generating companies, as well as gas firms, but not all of those funds have been disbursed, because of the issues that we are trying to resolve with the Nigerian Electricity Regulatory Commission, as well as the Nigerian Electricity Bulk Commission,” he said.
He continued that once some of the issues had been resolved, more funds would be disbursed. “Yes, those DISCOS are supposed to use the money to buy meters, transformers, and so on so as to improve their capacity, while the GENCOS are required to use the funds to acquire equipment, replace some of their obsolete equipment so that they can also improve on their generation capacity.”
He believed however, the some positive impact has already been seen and that by the time the remaining funding has been paid out, that further improvements would be evident.
“Government, realising that the transmission capacity may be hindered, is already taking steps on how to invest in transmission, so as to improve capacity in that area,” he concluded.