The Paralysis in Nigeria’s Electricity Sector

The Paralysis in Nigeria’s Electricity Sector

These days, I just pity the Nigerian Electricity Regulatory Commission (NERC). Listening to the big boss as he makes a case on the future of Nigeria’s electricity sector, you will hear a man who is at a crossroads on policy.

The Nigerian Electricity Regulatory Commission (NERC), says no tariff increase has been approved by the commission yet. In a statement, Usman Arabi, NERC’s General Manager, Public Affairs, on Friday said it was still consulting with stakeholders. He said that the commission wished to notify the public that no tariff increase had been approved by the commission contrary to the impression in some quarters.

“However, the commission in the discharge of its statutory responsibilities enshrined under the Electric Power Sector Reform (EPSR) Act, shall continue to undertake periodic reviews of electricity tariffs in accordance with prevailing tariff methodology.

“In all instances of such reviews and rule-making, the commission shall widely consult stakeholders and final decision shall be taken with due regard of all contributions,” he said.

Yes, NERC is at war with everyone. It had promised a decent market-based reflective tariff, and investors showed up for the privatization program. (Sure, the process was not evidently optimal but that is now a past tense.)

The lack of cost-reflective tariffs is discouraging investments in the ailing Nigerian electricity sector, a firm involved in power generation in the country has said.

Azura Power, which in 2018 delivered Nigeria’s first privately-financed power plant in Edo State, has acquired a new power plant in Senegal, investing funds an official of the company says would have been deployed in Nigeria.

The Managing Director of the company, Edu Okeke, confirmed the development to PREMIUM TIMES on Thursday after closing the deal for the Tobene power plant in Senegal. Located in Taiba Ndiaye, 90 kilometres northeast of Dakar, the capital of Senegal, the 115 MW plant started operations in 2016.

Then after the process, the court ruled “Not Here” – this tariff is illegal in this land and cannot stand. Simply, get back to the “old tariff”. Unfortunately, with the current tariff, many investors do not see a long-term value creation opportunity in Nigeria. Of course the government is managing the paralysis – but the slumber will be long!

I heard that Siemens is coming; we welcome Siemens. But electricity challenge in Nigeria has never been about generation. The problem remains distribution and that means the ability to collect money from people that still believe that electricity should be free because it is one of the rights enshrined the Nigerian Constitution. Of course, nothing like that.

The Federal Government of Nigeria has signed a partnership deal with the German Government and Siemens AG. The presidency announced the partnership this afternoon as a step in addressing the epileptic situation of power supply in Nigeria. The deal, which is designed to take effect in 2 phases, has a target of 7, 000 megawatts of power generation by 2021, (the 1st phase) and subsequently, 11, 000 megawatts by 2023, (the 2nd phase). President Muhammadu Buhari stated that the initiative has become necessary in the face of helplessness of Nigerians with current power supply infrastructure

Do not think too far – the tariff for potable water in a state in South South geopolitical region in Nigeria was last reviewed in 1987. Yet, the state is looking for investors to provide potable water in the state! I saw the document and wrote to the project manager, and asked him if he could get the state to update the water rates. The response was typical – “The government cannot increase rate because it will be politically sensitive”. Of course, nothing happened, and no investor thought there was anything there. 

Our leaders must find a way to engage Nigerians honestly on open conversations to move the nation forward. From electricity to potable water to healthcare services, unless there is decent revenue factor in the equation, it will be hard to move from the miry clay on the provision of basic services. 

And the legal institutions need help and only the National Assembly can help them by updating the laws  to avoid confusions in markets. Yes, the updates will help to engineer reflective costs that will make services become available as investors are attracted by the opportunities therein to participate. This does not mean that Nigerians should be priced out. Yet, Nigeria cannot also afford to price investors out. A win-win is needed on these services on cost.

Advertisements

Share this post

2 thoughts on “The Paralysis in Nigeria’s Electricity Sector

  1. “From electricity to potable water to healthcare services.” You skipped one key item: education. To believe it should be so cheap is very delusional, that’s why the quality remains questionable.

    We seem to make everything here appear very difficult and complicated, NERC is talking about ‘stakeholders’, and who are these stakeholders? Apparently few people have become stakeholders for the rest of us, because no one has come to my house to ask me how much tariff would be affordable, and yet the stakeholders struggle to come to a decent agreement…

    What is lacking in Nigeria is quality humans who are creative, imaginative and capable of taking initiative. The confused minds need help: sack them!

    All the excuses we put out are too lame and inept, from court rulings and the inability to craft new laws to take care of any unfavourable rulings, to a political jobbers worried about political price to pay, for doing the right thing.

    You don’t need to pamper Nigerians to get things done, just get to work and demonstrate high sense of discipline and responsibility; then leave the rest of the fight for ordinary Nigerians, they will cancel each other out, while you come out successful.

    Poor thinking is scarier than corruption.

    Reply

Leave a Reply