Nigeria’s Electricity Loop and Darkness of a Nation

Nigeria’s Electricity Loop and Darkness of a Nation

It seems easy on paper: privatize the electricity authority (NEPA) which belonged to the commonwealth and give it to private companies to operate. If you do that, the companies will improve efficiency and provide 24/7 electricity to companies and citizens. Unfortunately, that has not happened. Sure, we can blame the electricity companies. But if you look deeper, things are not that easy. Just like in water rates which have not been increased since 1997, in some states in Nigeria, electricity rates in Nigeria are out of sync with inflation, currency devaluation and every element of market systems. Simply, to serve the citizens at the current rates would be charity for distribution companies (Discos). Of course, they would not – and the government has been coming onboard, helping to fix  many broken elements.

The problem is this: when the government transferred the assets from NEPA to the new companies, it had expected that it could relax while the new private firms provide power. But with all the paralyses, the government has been looped into the mess and has been spending like before, mass producing darkness at scale.

This season was supposed to help break that loop, through a planned increase in electricity tariff. Easier said than done. You know what? That has been frozen because Nigeria is not ready for any hike. Blame Covid-19. Blame our attitude. As usual, the new rates will come next year, and next year will become one after next, and we will continue to suspend hard decisions. I get it: provide us Harvard-level education (our rights) but we can only pay $400 even when you know that Harvard costs an excess of $55,,000 per session

Electricity distribution companies in Nigeria (DisCos) have agreed to suspend the planned increase in electricity tariff after a meeting with the National Assembly leadership, an official has said.

The DisCos reportedly agreed to suspend the increase till the first quarter of next year while the leadership of the National Assembly has promised to meet with President Muhammadu Buhari on the issue.

[…]

“The agreement here is that there is not going to be any increase in the tariffs on July 1st. The Speaker and I, we are going to take appropriate action and meet with the president.

“We are in agreement here that there is no question on the justification of the increase but the time is simply not right and appropriate measures need to be put in place. So between now and the first quarter of next year, our task will be to work together with you to ensure that we put those blocks in place to support the eventual increase in tariffs,” Mr Lawan was quoted as saying.

While he noted that the planned increase in the tariff was of concern to the lawmakers, he said the government has been doing a lot as part of its obligations to provide some form of intervention.

Of course, I get it: do not increase rates until you can give me 24/7 electricity. Unfortunately, no one can give you that until you pay. The only workable option has been: allow me to increase rates, and I will have better margin to invest to provide you better services. As it stands now, no investor will invest in Discos because their numbers do not make sense at the current electricity rates. As that happens, be sure of darkness. In my office in Owerri, we use two generators -and the national grid is our second backup!

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One thought on “Nigeria’s Electricity Loop and Darkness of a Nation

  1. We can rationalize as we deem fit, but the increasing debt profile will not be easily dispensed with. By the set date in 2021, we should be looking at N3.5 trillion exposure. Who in their right mind will invest in such a market?

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