During the nationwide lockdown aimed at curbing the spread of coronavirus in Nigeria, the citizens were elated that power was constant, but as the government eased the lockdown so also did the power situation gradually return to its old ways; BENJAMIN UMUTEME reports.
It is obvious that the power sector is plagued with several challenges including but not limited to illiquidity, non-cost-reflective tariff and government interventions.
However, after the privatisation, the power sector has been recording negative balance sheets. According to the Nigerian Electricity Supply Industry (NESI), the losses recorded by the sector translate to an average of about N1.5 billion monthly, totaling about N90 billion as at 2018. This loss is attributed to water, gas and transmission line constraints.
The power sector was reported to require an investment of about $7.7 billion to fix its dilapidated infrastructure and other relative machinery to clear the rot. However, this is despite the financial bailout of about N2.9 trillion the sector has received since 2015 to date.
Between 2015 and 2018, the Obama’s Power Africa, the USAID- initiative has injected about $1 billion into reviving the power sector. In 2015, the federal government, through the Central Bank of Nigeria (CBN), provided the sum of N213 billion as Power Sector Market Stabilisation Fund at a concessionary single digit interest rate.
Also, in 2016, the government created a N701 billion payment assurance guarantee through the CBN for the Nigerian Bulk Electricity Trader (NBET). In the same year, the Japanese government staked over 1.3 billion Yen, an equivalent of $11 million and N2.2 billion, to the development of Nigeria’s power sector. In 2017, the World Bank issued over $3 billion and then $2.6 billion, which amounted to $5.6 billion under review.
Despite the monies pumped into the sector to make it work, the situation seems to deteriorate. Many say the power companies are back to their old ways.
Covid-19 pandemic
When the coronavirus outbreak was first reported in Wuhan, China, in December 2019, many thought it was ‘their thing.’ But by early March, hundreds of thousands had contracted and tens of thousands more had succumbed to its power.
However, in Nigeria, the first confirmed case was announced on February 27, 2020, when an Italian citizen in Lagos tested positive for the virus. On 9 March 2020, a second case of the virus was reported in Ewekoro, Ogun state, a Nigerian citizen who had contact with the Italian citizen. Fast forward to seven months later, the number of confirmed cases has risen to 44,433 with active cases at 11,672, while recovered cases rose to 31,851 and 910 deaths.
The lockdown imposed by the government meant businesses practically came to a halt. In order to cushion the effect of staying at home, power supply to the populace improved significantly, making even the few business that were allowed to operate to cut cost on alternative energy spending.
Meanwhile, with the gradual easing of the lockdown, what many called ‘a miracle’ due to the almost uninterrupted power supply gradually returned to its old ways.
Businesses lament
Small businesses which have been operating skeletal services have been lamenting the power supply situation. Many say the little ‘palliative’ they enjoyed during the lockdown seem to have disappeared. Others say power supply was steady because most of the industries that used power were shutdown.
For make-up artist in Jikwoyi Phase 3, a suburb of the FCT, who prefers to be called Mummy Kamsy, power supply has been erratic since June. According to her, it has not been easy as she spent more on generating power to run the business especially in this times when activities are dull.
She told Blueprint Weekend that in July alone, she spent N4, 000 on fuel to power her generating set. She said she had to do it or may of her customers would elsewhere to fix their hair.
“There was a time I stubbornly refused to buy fuel for a week, and nobody told me to repent because I knew what I lost those five days,” she said.
Experts’ views
Estimates from the Manufacturers Association of Nigeria (MAN) revealed that the country’s manufacturers spent N93.1 billion on alternative energy source in 2018. According to MAN, the figure was even down by N24.28 billion from the N117.38 billion that was spent in 2017.
“Paucity and high electricity tariff have posed dismal challenges for Nigeria’s manufacturing sector over the years. “However, electricity supply appears to have slightly improved in the second half of 2018 at it stood at 10 hours per day as against nine hours per day recorded since the second half of 2017,” it stated.
The situation has made production environment excruciating due to inadequate power supply which has increased demand for gas as alternative source of power generation.
“The persistent increase in the price of natural gas used by our members to power their plants and machineries has reached a crisis dimension,” Mansur Ahmed, president, Manufacturers Association of Nigeria (MAN), said.
“Similarly, the continued denomination of price of gas in US dollars has made the product perpetually exorbitant and gradually getting outside the reach of majority of the manufacturers, particularly the small and medium industries.”
In the same vein, the national chairman of Non Metallic Mining Group of MAN, Mr. Afam Mallinson Ukatu, expressed concerns over the increase in the price of gas, regretting that “it is coming when the global economy is facing a very difficult time.”
Ukatu said; “The pandemic is not peculiar to Nigeria alone, it is ravaging the global economy, but I expected the government to give palliative to manufacturers to cushion the resultant effect of the pandemic instead of the commodity price going up.
“We have been complaining that we are being charged in Dollar for consuming gas locally and nothing has been done to reverse the ugly trend. I have been complaining about this over the years at the parent organisation (MAN) for a very long time that the trend should be reversed and also for the government to look into it.
“It is very painful that gas, which is gotten from our soil, is being sold to us in US dollars. We are being charged according to the exchange rates. Now that the exchange rate has gone, following the technical devaluation of the Naira, and scarcity of Forex, the increase has come again when we are asking for what palliative the government should give us to ameliorate our situation, and to enable us pay salaries, gas bills and offset some bill that accumulated during the lockdown. We were also looking at the government to give us some relief for one year or more, but what we are getting is increased gas price. This is not done in any part of the world, it is only in Nigeria that this is happening and it is quite unfortunate.”
According to him, the current price of gas has pushed the cost of production up by over 30 per cent, stressing that they are losing huge amount on a daily basis.
“In 2019, we were advised not to pay the actual gas bills that the government has given some incentives to some sectors like the textile sector. So we asked a question, why was textile the only considered sector while there are other sectors that are purely producing made in Nigeria goods which are neglected. However, as we speak, the textile sector has even gotten that discount. I am amazed that the government who is supposed to be encouraging us in other to employ more people is behaving this way. This is however a deterrent to intending investors.”
For another manufacturer Adeola Yusuf, manufacturers are forced to buy diesel, forced to spend money on maintenance.
He said, “In fact in some cases, the burden creates another job of employing an engineer on full time because to use generator is a constant thing, so they need an engineer that will be on generator or electrical beat. So, it has an overall effect.”
As economist Friday Efih puts it, energy cost constitutes about 40 per cent of production cost. Adding that it is a major reason why Nigerian products are not competitive.
“These are major constraints that impede competitiveness and exert overbearing pressure on the bottom-line of manufacturing concerns,” he said.
