For Nigeria to lift millions of its population out of the extreme poverty line, the most populous nation in Africa would need to first fix its power sector that has left about 120 million people with less than hours supply of electricity, according to Sanusi Lamido Sanusi, Chancellor, Kaduna State University.
An electricity tariff that is cost-reflective and free of any form of subsidy is one of the first steps to achieving a steady power supply, the former governor of the Central Bank of Nigeria (CBN) said at the Nigeria Economic Summit on Tuesday.
According to AIION, an independent company funded by Royal Dutch Shell, about 120 million Nigerians do not have access to electricity or have less than 4 hours.
This translates to 14.2 million households and 4 million SMEs who do not have access to electricity (currently off-grid) in the country.
“Why is it that these countries that on paper, poorer than Nigeria are paying cost-reflective electricity tariffs and getting regular power supply?” he questioned. According to him, “Nigeria cannot pay cost-reflective tariffs because we see electricity as just consumption.”
In Nigeria, the concept that electricity should be cheap because it is a ‘social good’ has kept the sector inefficient and the government has continued to subsidise electric power consumption.
The electricity market subsidy goes entirely to two tariff classes, the R1 class which is paying and continues to pay N4 per kilowatt-hour (kWh). This is N50 below the average range of N53 – N55 per kWh to deliver electricity. Nobody is complaining because the Discos have systematically moved many of these consumers to R2, which pays more, according to industry analysts.
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The second bit of the subsidy and the overwhelming bulk goes to the R2 class. This is the class where everybody from the president to the middle-class population living in the urban areas belongs. The average tariff is between N25 – N26 per kWh. The remaining N27 – N28 is paid by the Federal Government, analysts said.
Despite the subsidies, which presents electricity as a social good, providers consider electricity as a market commodity just like any other product or service where (in general) the higher the amount you pay, the higher the likelihood that you will receive better quality of that product or service.
“If you produce electricity at a high price and it is available 24/7 the poor people of this country will take it and become among other things mechanics, electricians, carpenters and they will make enough money to pay for the tariff and some lift their people out of poverty,” Sanusi said.
Meanwhile, more Nigerians have fallen into extreme poverty following the impact of two recessions within five years and a pandemic that made an already bad economy worse.
The World Bank estimates that an additional 7 million Nigerians have been pushed into poverty in 2020 due to falling purchasing power. This makes the total number of poor people to be 90 million from 82.9 million in 2019.
Nigeria’s Gross Domestic Product (GDP) growth of 5.01 percent in the second quarter of 2021, the third successive quarter growth after negative expansion rates in the second and third quarters of 2020, is nothing but undesirable as the worsening social and economic indicators of Africa’s most populous country persist.
The former CBN governor, therefore charged the government to use the scale of preference in making decisions to enable millions of Nigerians to help themselves out of extreme poverty.
“Understanding that we are making choices and they should be based on a well thought out and well-articulated scale of preference- what is it that has the highest impact on SDGs,” he said, adding that “getting that right at the federal and state level is critical.”
