The announcement by Sam Amadi, chairman of the Nigerian Electricity Regulatory Commission (NERC), that Nigerians will witness another hike in electricity tariffs, without any corresponding improvement in power supply to justify such an increase, is outright provocation and unfair to Nigerians who are being compelled to pay more for darkness. An amended “special” Multi Year Tariff Order to be known as MYTO 2.1 officially took off on Christmas eve. Essentially, from last Wednesday, electricity tariff went up. However, because service delivery has not improved significantly, NERC announced that distribution companies will not increase tariff for residential consumers for six months. Other customers would, however, witness an increase in what they pay for electricity. Needless to say the hike is insensitive, anti-people and unacceptable and should be shelved in the interest of peace.
At our pathetic level of underdevelopment, hiking tariffs without a corresponding increase in power supply is immoral. The question must be asked: are Nigerians not suffering enough and why would a government consider adding to their heavy burden? Nigerians need a respite from the unbearable economic hardship in the country. Amadi explained at a press conference in Abuja, that the increase is premised on verified losses that DISCOs were facing and the new price of gas, which took effect this month. “The implication of the increase in losses level is that the tariff will go up because the cost of distributing power will increase. Each of the distribution companies will, however, design a tariff on how to recover their revenue because what NERC has done is to insist that they will not increase tariff for R2 customers for six (6) months.”
Coming in the wake of last year’s hike under the Multi-Year Tariff Order (MYTO), tariff regime, which had the same justification like the new MYTO 2.1, the fundamental question remains; why another increase without any commensurate increase in power supply? The MYTO tariff schedule shows consumers are paying higher on two fronts – the fixed cost and the cost per kilowatt of electricity have all increased. So, whether the new tariff takes effect now, or in six months, there is still no justification for consumers to pay for what is not available. There is also no justification for compounding people’s poverty and misery, by imposing a tariff hike to compensate an inefficient system. That is official daylight robbery; aiding and abetting the exploitation of Nigerians by charging them higher tariff when electricity supply remains erratic, all in the name of transforming the power sector.
It is trite to state the very obvious multiplier effects of hiking electricity tariff, but it bears restating the wide-ranging negative implications that seem perpetually, incorrigibly lost on Nigeria’s policy makers. Notwithstanding claims to the contrary, an increase in the cost of power will directly push up the prices of goods and services. NERC has admitted that: “when we were privatizing, there was some lack of credibility with the data that was put forward and the agreement was that there was no need to argue and that when they come in, they conduct independent study of the loss levels and verify with NERC who will put it back through a special tariff review if the study is ascertained to be credible. That is why it a special review and not our normal six months review because this is based on one of the recognition of the agreement that they have to confirm that losses are as we projected. The commission has now accepted those losses level and it is now to put it into the tariff.”
This is insane, amid the worrying disclosure some time ago by ex-Power Minister, Chinedu Nebo that as many as 120 million Nigerians (out of a population of 160 million) are currently without electricity. The logic of hiking tariff as a precondition for investor participation, is unjustifiable, and certainly, not in the national interest. The burden on citizens is enormous, as they also have to battle with scarcity and high cost of kerosene, diesel and cooking gas. If the hike is aimed at pleasing investors, it subjects Nigerians to more suffering, indeed double jeopardy. People should not pay for what is non-existent. The ideal thing is to work towards putting power first. Thereafter, it would be clear to all and sundry that there is a change that could warrant tariff increase. As things stand, there is no guarantee that in six months, after subjecting consumers to high charges, there would be commensurate increase in power supply, which is what Nigerians want.
NERC explained that with the commencement of MYTO 2.1, the Commission would now progressively hold electricity distribution, transmission, generation companies as well as other market operators to the terms and conditions of their licenses. Amadi said: “It is expected that the take-off of MYTO 2.1 will bring about improved service delivery as distribution companies are now expected to implement their investment plans for metering and strengthen their networks in line with their bid documents.” This is a luxurious desire, and mere wishful thinking. Nigerians have heard similar commitments before that came to naught. It certainly requires no magic to give Nigerians constant power supply. The excuses for the dismal performance can sometimes be as unpardonably hare-brained as they are laughable.
Underlying all these excuses, Nigeria needs a relatively puny $6 billion to invest in the oil and gas sector. The country currently has about $24 billion lying idle in the excess crude account. These funds should be invested in critical infrastructural and economic projects. The Jonathan administration should urgently begin to build a national gas grid that is wholly Nigerian-owned or in partnership with credible private sector players within a public-private partnership. The grid can be built within four years, and should have capacity to handle gas volumes far in excess of the present limited domestic and regional demand. Such gas infrastructure will stimulate further domestic demand for expanding electricity requirements and various industrial purposes as well as facilitate domestic gas competition. Right now, as far as power is concern, the dark days are, sadly, far from over.
In his inaugural address on May 29, 2011, the president promised that power sector reform was at the heart of his industrialization and transformation agenda. At that time, power generation was about 3,500 MW. Over three years later, and billions of naira voted for it, this miserable figure has increased by no more than an even more miserable 1,000 MW. According to the Nigeria Vision 2020 Economic Transformation Agenda, “the overall target for the power sector is to grow installed power generation capacity from 6,000MW in 2009 to 20,000MW by 2015 and 35,000MW by 2020”. Needless to state, the 2009 target has yet to be achieved in 2014. In any case, it is fraudulent to make people pay for capacity, rather than what is produced or consumed. As Nigerians prepare to go to the polls, President Jonathan ought to be worried about public summation that the greatest evidence of leadership failure is the embarrassing state of power supply. The President must deliver on his critical promises to transform the power sector for history to judge him fairly.
