Open letter to the Senate President 

Dear Distinguished Senate President;

I write this open letter to you with the hope that you get to read it.  Knowing over-zealous Special Assistants, Secretaries, you may only be allowed to see one side of the coin in some matters.

The decision of the Senate to disallow the proposed electricity tariff increase was not a surprise.   By this act, the Senate may have set the power sector back as this sends an alarming signal to investors and scare away foreign investments, a catalyst in any developing economy.  The Senate could have demonstrated a liberal understanding of the fundamentals of the sector by granting the tariff increase, but tied to measurable milestones such as agreed distribution loss reduction targets, increase in meter coverage, better collection metrics, and better customer experience.  Cost reflective tariffs are necessary for improved performance of the sector.

The recent planned implementation of increased electricity tariffs for distribution companies, unpopular as it may seem with some stakeholders, is a vital step towards ensuring financial viability of the privatized distribution companies and the entire electricity value chain back through to the privatized generation companies and their fuel suppliers.  It is also a clear indication that the government is serious about making electricity privatization to succeed.  It is a fact that power supply has dropped significantly in most parts of the country due to various factors such as pipeline vandalization, unavailability of treated gas, low water levels at the major dams, etc.

Furthermore, the Senate could have made the expedition of meters a tie-in to tariff increase.  With meters, consumers will only pay for power consumed, thereby managing consumption better; rather than the notorious estimates!  It should be mentioned that estimated billing is not unique to Nigeria; the practice is still present in developed environments, but mainly when meter readers are unable to gain access to properties to take meter readings.   Meter installation targets should be a major performance index for the distribution companies, with clear targets that are measurable and transparent to consumers.

It lends to worry that the recommendation of a bonafide agency, the Nigerian Electricity Regulatory Commission (NERC), an independent body responsible for regulatory functions of the sector, which would have carried out necessary due diligence, was nullified in one fell swoop.  The magnitude of the damage to the regulatory powers of NERC by the Senate is a real risk for the Power sector.

The crash of oil price is a good reference to re-examine our corporate model.   Diversification of the economy is an imperative.  Power will be a major driver of this renaissance as long moribund sectors take flight!  Manufacturing will grow exponentially, with attendant job creation and growth of the real economy.

Time was when government funded everything.  With exponential population growth and rapid urbanization, those days left this shore a long time ago, while the boom price of oil was the opiate.   Private capital is needed to develop our infrastructure (power, water, roads, housing, etc).  Private capital whether local or foreign will not come if there are no clearly defined institutionalized processes.   Even the most benevolent investor wants the appropriate enabling environment where the rules of investment are clear with comparable return on investments relative to the risk taken by the investor.  If there is no clarity for investors, then investors are scared off and forced to seek more conducive climes to invest. The recent action of the Senate may have already done some damage of stopping much needed direct investments in the Power sector.

A country blessed with potentials and population is an investor’s haven!  But if they fail to see the necessary security and due process, they would rather invest in smaller African countries which are now a major competition for investment.  Investors are already knocking on the doors of other West African countries such as Ghana, Benin, and Cote d’ivoire; Nigeria must not lose that edge!     Nigerians want steady power supply.  Most homes have become their local power generating utility.  Nigerians should have a better quality of life as experienced when we travel abroad.  We missed the train a long time ago; it’s time for us to jump back on it.  We want to live dignified lives like those in advanced economies do and not continue living like Neanderthals.

We need to take hard and realistic view of the issue.  If the Senate is concerned about affordability of tariff by the vulnerable segment of the society, there are other instruments such as government subsidy, which could be explored.  We should not throw away the baby with the bath water!

Nigerians can see the multiplier effect of stable power supply; we hope the Senate will reconsider this sensitive matter and support the change agenda of the current administration. Nigerians can no longer remain in darkness, whilst the rest of the African continent develops!  Let’s collectively support the direction of the new administration in this area.

 

Best regards,

Shayo Holloway (Engr.)

Former Group Managing Director Lagos Water Corporation, now a Consultant