Nigerians groaned a few days ago when the news broke that the Nigerian Electricity Regulatory Commission (NERC) had increased the costs of prepaid meters. Based on the memo, a single-phase meter hitherto sold for N44, 896.17 will now cost N58, 661.69. Also, a three-phase meter which until now cost N82, 855.19 is now to be sold for N109,684.36. This is a 32 percent increase in the respective costs of the meters.
Undoubtedly, electricity production and consumption have a direct relationship with wealth creation. Not surprisingly, the leading countries of the world in trade, higher GDP per capita, low interest and inflation rates also have very high electricity consumption per capita.
Nigeria ranks poorly on the aforementioned parameters as she is a laggard when rated on the platform of variables like: international trade and GDP per capita. Before the latest increase, in 2019, electricity bill constituted 11.57 percent of the non-food expenditure and 5.01 percent of the overall expenditure of every household in Nigeria. With higher tariffs, the proportion of households’ expenditure on electricity would have increased more. The last one year has witnessed higher inflationary pressure, which while it maintained a rising trend, the national minimum wage remained unchanged, implying that more households are worse off now compared to the pre pandemic period. The impact of low purchasing power of households could be seen in the low demand for goods and services. In the last five years, the Nigerian economy entered recession twice, forcing the government to embark on demand side management of the economy. It is in the light of the above that the federal government and all the stakeholders in the electricity sub -sector must review the processes that led to the reforms of the sector a few years’ back. Undoubtedly, Nigeria is yet to get the magical wand that will unleash the potential of the electricity sub- sector.
With electricity generation hovering about 4000MW, nothing much has changed. The electricity consumption per capita remains very low, years after the reforms of the electricity subsector. The out of pocket cost of providing alternative light is higher now, in view of the current prices of crude oil at the international market.
In 2019 and 2020, Nigerian households and businesses spent $12 billion and $14 billion respectively fueling their generators so that their businesses would not go under.
The amounts businesses and households spent in those years and now to provide alternative electricity supply could have been ploughed back into their businesses, thus providing cheaper funds, while households’ savings could have improved if a significant portion of the above cost had been saved. In the end, the economy would have benefitted as households’ savings will have a positive impact on investment which will lead to higher productivity.
There is no doubt that an urgent reform is needed in Nigeria’s electricity sub-sector. Businesses and households are frustrated, and dreams are shattered with erratic power supply.
Without a functional electricity sub sector, the much desired growth and poverty alleviation will remain elusive.
It is high time we called a spade a spade. The electricity sub sector needs urgent overhauling. One of the ways to move the electricity sector forward is to implement good corporate governance in the sector. Unlike the telecommunications sector, Nigerians do not have access to the information on the developments in sector as at when due. Where on the website of NERC can Nigerians get current daily electricity generation and distribution?
In the telecommunications sector, an average Nigerian has access to the number of subscribers per state per telecoms operator.
The telecoms’ industry statistics, especially the market size and the sector’s contribution to the nation’s Gross Domestic Product (GDP) are readily available. The electricity sector operates in an opaque manner, where everything remains hidden from the public. This must be addressed.
Without a functional electricity sub sector, the much desired growth and poverty alleviation will remain elusive. The over 41 million SMEs in Nigeria groan under a huge burden of providing alternative power to their businesses. And this greatly tells on their ability to create jobs.
Having endured the system for over six years, it may not be a bad idea for the federal government to overhaul the entire value chain. There is the consideration that the current federal administration has less than two years, regardless, as against overhauling the entire system, the clog in the wheel of the electricity sub sector should be identified and addressed. In this case, the remaining time left in the life of this administration will be sufficient to address sub- the gaps in this critical sub-sector.
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