Governmenth has ran out of ideas on how to manage Nigeria’s intractable power crisis. The power distribution companies (DisCos) want instant increase in power tariff, but consumers insist it should happen after improvement in power supply. Last month the Nigerian Electricity Regulatory Commission (NERC) grudgingly bowed to pressures from the industry and reviewed power tariff which has remained static for almost three years. Under the provisional tariff, residential consumers in low tariff DisCos like Ikeja Electric would pay an average of N37 per kilowatt hour (KWH) of electricity, up from N22.8. Those in high tariff areas like Abuja might pay something in the range of N47 per KWH.
NERC had inadvertently published the new tariff when it remembered that it did not consult stakeholders in the industry. As the DisCos scrambled to implement the new tariff on January 1, 2020, the regulator called a press conference and announced that it has not authorized its implementation and that it would hold consultations before the new tariff comes into force in April 1, 2020.
As usual, consumers are already up in arms against the implementation of the new tariff. One human rights organization has obtained a court order halting its implementation, pending the determination of a suit that may drag for four years in a judiciary where more than 200, 000 cases are assigned to only 87 judges.
Given previous trends in attempts to hike power tariff, one is tempted to conclude that the new tariff hike is dead on arrival. As in previous cases, the argument of consumers is that power tariff hike could only follow regular power supply and an end to the pen robbery by DisCos in the name of estimated bills.
The argument that power tariff hike should only follow an improvement in power supply stands economic logic on its head. The truth is that the DisCos are very bad operators. What they do with estimated bills amounts to pen robbery. However, some consumers are worse than the DisCos. Some years ago, legislators in Apo Village, Abuja circumvented their pre-paid meters and stole power by connecting direct to the lines. Thousands at the lower end of the market equally steal from the DisCos.
The armed forces and the police hardly pay their power bills and no one dares to disconnect them. The manager of the DisCo would do frog jump for hours as punishment for his dare-devil posture. With the balance of terror between operators and consumers, the tariff should be something close to the open market value of what is consumed even if power is supplied three hours in a day.
The tariff hike sounds outrageous because it has not been reviewed for close to three years even as prices of everything in the market have surged. However, the simple logic is that we cannot trudge on with the current tariff after the naira was devalued from N199 to N305 to the dollar at the official window. The DisCos import their equipment at the parallel market rate of N360 to the dollar and they have borne that burden for three years without passing a fraction of it to consumers.
Nigerians are wedded to cheap electricity and petrol prices. However, the situation in the open market does not justify the claim that tariff hike could only follow regular power supply. We pay market prices for popular items that are grossly in short supply.
More Nigerians consume rice than electricity. About 40 per cent of the population of Nigeria has no access to electricity. However, even the rural dwellers in the remotest part of Nigeria consume rice.
Last month Lagos State government ramped up the price of Lake Rice from N12, 000 to N17, 000 per 50kg bag. Like electricity, Lake Rice is grossly in short supply. Sometimes it is out of the market for three straight months. Ironically no one went to court to complain about the 25 per cent hike in the price of the product when supply is inadequate.
Nigeria musters one of the lowest electricity and petrol prices in Africa. A kilowatt hour of electricity in Ghana sells for $0.13 or N46.8 at the parallel market rate of N360 to the dollar.
The truth is that Nigeria’s eternal darkness would end the day consumers are willing to pay the open market price of electricity. Cheap items are almost always scarce. That is why power supply is irregular.
Nigerians see cheap electricity and petrol as their share of the grossly abused national cake. Successive governments had bribed the populace with cheap electricity and petrol to make them ignore the monumental treasury looting that has reduced Africa’s largest economy to the world’s headquarters of poverty.
Nigerians must learn lessons from Ghana, a smaller economy that offers a lower standard of living to its citizens than Nigeria. In Ghana, the pump price of petrol is $0.974 or N360.64 per litre. A litre of diesel is about N360. In Nigeria the pump price of diesel hovers around N220 per litre even as the price is de-regulated.
Electricity is heavily subsidized in Nigeria. It is cheaper than cooking gas. A housewife ran out of gas and decided to cook with electricity. She bought 43.7kwh of electricity at N1, 000.
The 43.7kwh of electricity was used both for cooking and powering of everything in her house for five days at a time power supply was considerably regular.
After the experiment with electricity she refilled her 3kg gas cylinder at N800. The gas lasted for six days. It dawned on her that gas is more expensive than electricity.
Even if the regulator allows the new tariff to be implemented without any cuts after the consultations with stakeholders, the federal government would still subsidise power in 2020 with more than N500 billion.
Government worsened Nigeria’s power problem in 2013 by selling the distribution arm of the defunct Power Holding Company of Nigeria (PHCN) to incompetent, inexperienced and cash-strapped investors. The bad situation would be aggravated by sustaining a deficient and unsustainable tariff.
