When Nigeria increased the price of electricity, to make it reflective, so that distribution companies will not be rejecting power from generating companies, I reminded the Honourable Minister that he would be lucky if that goes through.  Yes, the rascality in the Nigerian judiciary is legendary: people can go to courts and get injunctions on price increases!

Today, it has happened again: “A Federal High Court in Kano has delivered a landmark ruling, issuing a restraining order against the National Electricity Regulatory Commission (NERC) and the Kano Electricity Distribution Company (KEDCO), effectively stalling the implementation of a contentious new electricity tariff targeting Band A consumers.”

Recall that many distribution companies are bankrupt or failing. Why? They are unable to recoup their investments by adjusting prices on their products. Why? Anytime price is changed, someone goes to court to block the increase. It is the same thing we have also seen with DStv and GOtv. Magically, MultiChoice, the owner of DStv and GOtv, has been declaring losses over the last few quarters.

For the distribution companies, many have collapsed. For Kano Disco, as of the third quarter of 2023, Kano Electricity Distribution Company (Kano Disco) had a recorded loss of 52.48% while Kaduna Disco Board was dissolved over a N110bn debt. From Enugu to Abuja to everywhere, most have gone bankrupt and have been taken over by banks. Check why? They are losing money distributing power, and when they want to increase prices, a court stops them! Imagine if the court can rule against darkness so that we can get LIGHT free in Nigeria.

Yet, the generating companies which are paid by NBET with revenue guaranteed are doing very well; they represent some of the largest companies in the Nigerian stock exchange. But the downstream discos which pipe the electricity to homes are dying or dead. So, we have electricity but we cannot use them. What a nation.

When Nigeria increased the price of electricity, to make it reflective, so that distribution companies will not be rejecting power from generating companies, I reminded the Honourable Minister that he would be lucky if that goes through.  Yes, the rascality in the Nigerian… pic.twitter.com/PSdkxHYl60

— Ndubuisi Ekekwe (@ndekekwe) May 4, 2024

Comment on Feed: I am sorry to say this, price is not the major problem of e-DISCOs (Electricity Distribution Companies in Nigeria).

Two things drive value for any business, Volume and Price.

Only about 50%-60% of volume of electricity are billed by DISCOs.

Of those billed, they have roughly recovery rate of between 55% to 65%

Imagine a DISCO having over N267Billion as receivable, it shocks you, that is a fact.

Also, the electricity generating companies (GENCO) collect their incomes fully and most DISCOs can not fulfil their obligations to GENCO, the government foot the balance bill to GENCO. You now understand why people people like Femi Otedola opted for GENCO, less stressful compared to DISCO.

If DISCO can fully recover the electricity distributed to consumers, the issue of price won’t come up for now. Increasing price is just putting additional burden on those existing loyal consumers who are paying their bills regularly.

Recently, I saw a video of a town in Osun State where the indigenes were saying the palace or the King should not be made to pay for electricity, it is more than that.

Comment 2: To be honest, in markets where pure competition is or can be hindered, it is typical of the state to intervene in price determination. DSTv is a monopoly in the satellite TV market. Discos have regional monopoly in the electricity market. In both cases, if you allow them to determine prices, consumers would definitely suffer. We saw a semblance of that in international flights before Air Peace stepped in.

Even the Telecom sector in Nigeria today is oligopolistic in structure. Allowed, they would collude!

Therefore, it is important in these unique sectors that all stakeholders be brought to the table to discuss price adjustments following due process or in accordance with the laws. This is currently underway in the Telecom sector. In many cases, it is usually the ground for litigation – that due process was not followed. If the increase in Tariff is consistent with the law, those going to the courts, so so in vain.

However, for me, I think litigation efforts should be concentrated on ensuring that the Discos do not charge Band A tariff but supply Band B electricity, and so on. This would be exploitative.

A Federal High Court in Kano has delivered a landmark ruling, issuing a restraining order against the National Electricity Regulatory Commission (NERC) and the Kano Electricity Distribution Company (KEDCO), effectively stalling the implementation of a contentious new electricity tariff targeting Band A consumers. 

The court’s decision, prompted by a suit marked FHC/KN/CS/144/2024, represents a significant victory for the plaintiffs, including Super Sack Company Limited, BBY Sacks Limited, Mama Sannu Industries Limited, Dala Foods Nigeria Limited, Tofa Textile Limited, and the Manufacturers Association Of Nigeria Limited.

The legal battle, ignited by the plaintiffs’ objection to the tariff hike, saw Abubakar Mahmoud, their counsel, present an ex-parte motion before the court. Responding to the motion, the presiding judge, Abdullahi Liman, issued a compelling order, restraining NERC and KEDCO from proceeding with the impending tariff increment until the motion on notice filed by the plaintiffs is duly heard and determined. 

Additionally, the court order prohibits the defendants from resorting to intimidation or threats to disconnect the electricity supply of the applicants for refusing to accept the new increased tariff.

The contentious tariff hike, approved by NERC in April, targeted Band A consumers, who would have seen their electricity rates surge from N66 to N225 per kilowatt-hour. This abrupt escalation in tariffs sparked widespread criticism from various quarters, including the House of Representatives and other stakeholders, who called for the suspension of the tariff adjustment. Minister of Power Adebayo Adelabu defended the tariff increment, arguing that it would attract investors to the power sector, but the move was met with skepticism and opposition.

The legal intervention comes at a critical juncture, offering relief to consumers burdened by the prospect of escalated electricity bills amidst economic challenges.

Federal government boosts power supply with 625 MW additions.

As a legal showdown unfolds over proposed electricity tariff hikes, the federal government has announced a significant milestone in the energy sector, with the addition of 625 MW of power to the national grid. This augmentation, which elevates the grid’s wheeling capacity to 4800 MW, comes at a pivotal moment, coinciding with the contentious debate surrounding tariff adjustments targeting Band A consumers.

Bolaji Tunji, the special adviser on strategic communications to the Minister of Power, relayed this momentous development in a statement issued in Abuja. Tunji quoted Minister Adebayo Adelabu, who highlighted the significance of the achievement during the inauguration of key infrastructure projects aimed at bolstering the country’s power transmission capabilities.

Adelabu noted the transformative impact of these projects, underscoring their alignment with President Bola Tinubu’s vision for revitalizing the power sector and fostering reliable and sustainable energy infrastructure. 

Among the projects inaugurated were the 63 Mega Volt Ampere (MVA), 132/33 Kilo Volt (KV) mobile station at Ajah, Lagos, and the 60MWA, 132/33KV power transformer in Birnin Kebbi, Kebbi.

According to the Minister, these initiatives represent a strategic deployment to address transmission capacity constraints, with the potential to enhance electricity access and reliability nationwide by over 1300 MV. He further extolled the collaborative efforts of stakeholders, including the FGN Power Company, the German government, and Siemens Energy, whose partnership facilitated the production and installation of critical infrastructure.

The minister also announced the remote installation of a 60MVA power transformer at Birnin Kebbi, Kebbi, heralding a further boost to transmission wheeling capacity by 123 MW. These endeavors, he asserted, are pivotal in paving the way for enhanced electricity supply for all Nigerians, underscoring the government’s commitment to driving progress and delivering tangible improvements in electricity access.

In light of these developments, Adelabu emphasized the importance of collective responsibility in ensuring the success of government initiatives, urging all stakeholders in the power sector to work diligently to meet project delivery timelines. 

Echoing this sentiment, Kenny Anuwe, managing director of FGN Power Company, reaffirmed the company’s dedication to driving progress and facilitating tangible improvements in electricity access for all Nigerians, underscoring the collaborative spirit essential for advancing the nation’s energy agenda.

This addition, which underlines the government’s concerted efforts to enhance power infrastructure, provides a glimmer of hope for consumers grappling with epileptic electricity supply. Band A users have complained of not getting the required 20-hour electricity supply per day, under the new tariff initiative – a situation Distribution Companies, DisCos, attributed to insufficient power generation.

From comments on the piece on Temu and Shien, many people wrote of “quality” concerns. But let me tell you that we exaggerate “quality”. Indeed, as I explained in my thesis on a product Minimum Viable Quality (MVQ), we must be open when a new business model is emerging in the land. Quality without the considerations of price is a waste of time. Yes, comparing a hotel room you paid $20 with the one you paid $200 is not fair. Simply, you need to bound quality within the contexts of price and value.

Temu and Shien do not have quality problems since the customers are well aware that the prices those things are being sold could not have delivered the same value as alternatives which might cost 5x more. The real issue here is that Temu and Shien may not be doing well if not that the US has massive inflation which makes these platforms super attractive for those looking to extend their wallets.

For Temu and Shien, this is a business model: while there is a market for Amazon, there is one for those who may not need the quality you can find in Amazon products, but still have unmet needs. It is legal provided everything is disclosed. After all, we have markets for Mercedes Benz and Kia!

From comments on the piece on Temu and Shien, many people wrote of “quality” concerns. But let me tell you that we exaggerate “quality”. Indeed, as I explained in my thesis on a product Minimum Viable Quality (MVQ), we must be open when a new business model is emerging in the… pic.twitter.com/shGovirlBY

— Ndubuisi Ekekwe (@ndekekwe) May 4, 2024

As I have written, MVQ is that version of a new product which allows a team to sell the maximum amount of products to customers with the least effort and at the best optimized price even when delivering value. Yes, see it as a term that refers to a product version that is good enough for its target audience. It is also a way of saying that the product has enough quality for its target audience and no more. 

The fact is this: any product quality that does not correlate with cost (or value derivable) makes no sense. I have designed accelerometers (motion inertial sensors) where my employer gave me diverging product specification targets: one version was for $0.60, another for $260. The one for $0.60 was made for toys while the $260 was engineered for use in pacemakers (heart monitoring systems). In the cheap one, it was a very crappy product that was built to last for weeks. But in the expensive one, knowing a human life depends on it, it was designed never to fail with many redundancies and checks.

Without the cost context you can think that the cheap one was a poor job. It is indeed not a great quality product but that was by design. That is what the market for toys wants because the kids rarely use them for days before they are discarded. It is a mass market product which has to be affordable to make sense. That does not mean that you cannot make very expensive toys only few can afford. But what is the purpose? Put a $260 XL in a toy which would be dumped within days?

The deal is this: the construct of quality has no meaning until the price of the product is put into considerations. I always ask entrepreneurs to build for the Minimum Viable Quality (MVQ) bounded by the product target price which the market will respond to. You can build rockets to fly around the world: that is an engineering possibility. But does that make business sense if no one can afford it? Ask the makers of Concorde for answers.

Comment on Feed

Comment 1: Quality? That’s funny because what certain people don’t know and we that have been to China know is that Lui Kang in the factory making the Shein hoody is the brother of Chun LI in the factory next door making the hoody from Fashion Nova. The so called higher quality products are made in the same vicinity. Don’t let the branding fool you. Now it’s not all brands that are mass produced in China or Taiwan but some of the “high quality” products you put on a pedestal aren’t what you think they are.

My Response: Indeed, Apple is assembled in China also. It is about the pricing power.

Two companies: “Two Chinese-affiliated online marketplaces are causing significant disruptions in the e-commerce landscape with their remarkably low prices, despite facing scrutiny over labor practices. The rapid ascendance of Temu and SHEIN has been so meteoric that Amazon now regards them as its primary competitors, as per a recent report by The Wall Street Journal.

“Temu, which originated in China and commenced operations in September 2022, has amassed a user base of 51 million in the U.S., while SHEIN, a Chinese-founded fashion and lifestyle retailer, boasts nearly 14 million downloads in the U.S. market.”

With those records, Amazon has competitors. Unfortunately, this battle will not stop there; I see the US Congress opening enquiries on labour practices against these companies.

As I have written here, be careful investing in China-linked companies in the US. You are better off doing so directly in Beijing.  In other words, buy the shares in China, directly, via their parent companies. Like what happened with Russian firms like Yandex, HeadHunter, Ozon and Qiwi, if there is any disagreement between US and China, those companies could be suspended/delisted in New York.

"Two Chinese-affiliated online marketplaces are causing significant disruptions in the e-commerce landscape with their remarkably low prices, despite facing scrutiny over labor practices. The rapid ascendance of Temu and SHEIN has been so meteoric that Amazon now regards them as… pic.twitter.com/apkaihugXZ

— Ndubuisi Ekekwe (@ndekekwe) May 4, 2024