HomeNewsSupport for electricity tariff review in Nigeria

Support for electricity tariff review in Nigeria

By Benedict Alli

11 June 2012 – With the 1st of June having arrived media across Nigeria has been awash with news about the review of the country’s electricity tariff.

The unanswered questions by many are:

  • Are Nigerians paying very low electricity tariffs compared to their counterparts from other parts of Africa?
  • Are the poor going to be better off due to this review in tariffs which the government claims it is subsidising?
  • Who benefits from this review and who actually is made to pay more?
  • How can the 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 tariff rates and the thinking behind it. 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 here.

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 tariffs in the west African sub region. I asked myself how they got their figure so I went 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. Click on this link and you will see that Nigeria pays one of the lowest tariffs in Africa. (This tariff cannot attract investors. In fact 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 tariffs 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 the 30,000 MW to 50,000 MW Nigeria requires to get constant electrical supply. Do you know how much MW we are currently generating? Close to 4,000 that’s just 1/7 per cent of what we actually need. This is after successive governments have 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 clamouring 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 handouts as well? Government can decide to allow the exiting status quo and hope investors come (even my uneducated grandma can posit that no one will invest in the sector if tariffs remain as they are) 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 academic 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 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, there is 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, the decision to privatise 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 bid 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 Electric 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 have seen most of the power and gas projects completed and on schedule. This will ensure that the power situation improves. Because the availability of gas will ensure that power plants operating below capacity will be fired to full power this will result in more megawatts and that means that my a/c will run longer, I will watch TV for longer and children can do their homework for longer. I dare to hope.