NERC and the importation of generating sets

Editorial

Last week, the social media was awash with a roiling discussion of the news that the National Electriticity Regulatory Commission, NERC reportedly raked in about N938.5m from importers of generating sets and other internal revenue sources from June 2020 to June.

EnergyDay  recalls that NERC had in 2013 introduced a N25,000 charge per unit of 100KVA generator imported into the country in its guidelines for obtaining clearance certificate for the importation of generating sets and related matters.

It also fixed a charge of N3,500 per unit of between 25kva and 100kva generators imported into the country, while generators between 5kva and 25kva attract a charge of N1,000 per unit.

Furthermore, it resolved to begin the collection of N250 per unit of between 2.5kva and 5kva, while between 0.45 Kva and 2.5 Kva generators attract a charge of N150 per unit.

The amount collected by NERC is exclusive of duties and other taxes paid by the importers in the country.

The development was meant for the government to  reap billions of naira from the importation of generating sets.

In view of this medium, the import of  this policy becomes a matter of concern , especially when viewed against the development  that  before 2013,  Nigerian businesses reportedly  spent about N1.8 billion on importation of generators within one week.

This expose on generator armada and its huge drain on the Naira given a surge in demand for forex to purchase generators was gleaned from  a data obtained from the Central Bank of Nigeria, CBN, which revealed that 15 firms purchased $8.2 million from the CBN in one week to import generators alone in 2012.

It would seem the high levy was a double-edged sword meant to ramp in considerable revenues for the government as well as discouraging importation of the product.

EnergyDay could recall that about that time,  a global research firm, GBI Research, in its projection stated that the importation of generating sets in Nigeria  was  expected to grow to about N151.16 billion ($950.7 million) by the year 2020.

The research stated that  Nigeria is the largest market for diesel and gas generating sets in Africa, saying it forecast to see growth rate of about 8.7 per cent to drive up market volume from N71.55 billion ($450 million) in 2011, to about N151.16 billion ($950.7 million) by 2020.

The research firm  premised its optimistic projection for the boom in generator business on the epileptic power situation in the country going by the current state of generation, transmission and distribution networks, and economic growth in the country.

For us at EnergyDay, the crux of the matter is that importation of generators is biting indictment on the government’s inability to provide electricity to power national development, in spite of billions of Naira said to have been spent on the power sector with nothing to show for it.

Countries like South Africa generate enough megawatts of electricity more than they actually need, yet we project ourselves as giant of Africa.

There had been vociferous arguments even before the unbundling and eventual privatisation of power sector that government as far as Nigeria’s experience has shown has never been a good manager of business.

But it is the considered view of EnergyDay, as many commentators have also bought in to this position; that the privatisation of power sector has been a flop, as there is nothing on the ground post privatisation to show that Nigerian households and businesses have begun to enjoy electricity.

If any companies have resorted to providing power for their businesses at a huge cost, while households have been worst for it, as most communities have been in darkness for months without hope.

It is understandable that when the news filtered out that the Commission that is responsible for oversight and regulation of power sector has raked millions in form of levy from generator importers , The social media went on angst mode wondering how will DISCOs perform when the Commission responsible for regulating it has gone to bed with generator importers.

The fact is there’s nothing in the electricity regulatory law that says NERC can not levy generator business in the country, especially when it comes to importation of generators.

That does not detract NERC from its core duty of regulating DISCOs’ activities.

Though, the lax regulation and weak oversight exercised by NERC could inflame nerves against the Commission given enough infractions and flip-flops of DiSCOs which the regulatory commission seemed to have treated with kid gloves

It is high time NERC stood up to its responsibility, this medium urges the Commission to look inwards and re-strategise on how to win confidence of the people back,and the only way to do this is for it to up its ante and be up and doing.

The Lagos State government had in October 2021 revealed that as a result of the country’s inefficient and over-centralised electricity supply system, residents of the state alone, generated over 4,500MW daily through the use of generators.

Details of the financial position of the NERC showed that in the second quarter (Q2) of 2021, the IGR from fees arising from the importation of generator sets , licence processing and licencing fee was N431 million.

A breakdown of the amount showed that N20.23 million was generated in April, N160.79 million in May and N250.25 million in June of that year.

Furthermore, in the first quarter of 2021, NERC raked in N126.53 million, broken down into N50.80 million, N28.13 million and N47.60 million in January, February and March, respectively.

An analysis of the last six months of 2020 showed that in the third quarter of 2020, covering July, August and September, the industry regulator made N276.31 million from the same sources, segmented into N71.10 million, N111.11 million and N94.10 million, in the three months.

Similarly, in the last three months of 2020, NERC raked in N104.88 million from import fee imposed on the sale of generating sets, among others.

However, the total operating levy received from market charges were N4.868 billion for Q2,2021 and N5.061 billion for Q1,2021. Total revenue for the period was N5.299 billion and N5.18 billion respectively, with personnel cost gulping N1 billion and N1.88 billion respectively.

EnergyDay holds strong view that the core duty of NERC is not revenue generation but regulation of power sector so that Nigerian businesses and households can enjoy electricity they have paid for.