80 millions have no access to power
By Gbenga Olubumi
Hobbled by excruciating pains and suffering engendered by the removal of subsidy on petroleum, rising prices of general commodities, hike in transportation, there appears to be no end in sight for the much abused Nigerians as they have to grapple with daily grind of darkness or partial electricity.
This state of affairs becomes more insulting given that in the past ten to fifteen years, with over 50 billion dollars worth of investments in the power sector following the controversial privatisation carried out by the Good luck Jonathan administration; the industry has by default painfully disappointed Nigerians in its promise to supply reliable electricity.
This has led to anger and anguish and untoward losses to businesses and individual consumers.
The failure to deliver on its promise has led to the collapse of quite a number of industries and small scale companies, among others, as a result of the poor supply of electricity in Nigeria.
Investigations by EnergyDay showed that the country’s power firms generate and supply between 3,500 megawatts and 5,500MW of electricity to over 200 million in the country. Recall that precisely on December 28, 2023, for instance, power generation on the national grid was 4,690.07MW.
In general, Nigerian consumers are generally disappointed at the abysmal performance of the entire electricity ecosystem, the widespread feeling is that of disappointment and betrayal by the authorities that after sinking billions of dollars the country is still experiencing poor power supply.
“We cannot feel the impact of that privatisation because we still have darkness in many parts of Nigeria,” the President, Nigeria Consumer Protection Network, who served in the National Technical Investigative Panel on Power System Collapses/System Stability and Reliability (June 2013), Kunle Olubiyo, said recently.
The controversial sector privatisation
The power sector privatisation was an initiative of the Jonathan administration to cede ownership and management of power assets to private entities. The idea is to enthrone efficiency, garner investments, and enhance overall electricity supply.
The unbundling started in 2013, with the sale of distribution and generation companies. However, challenges like regulatory issues and infrastructure constraints have impacted negatively on the desired outcomes.
Recall that an aggregate of 11 electricity distribution companies and six generation companies were created as successor entities when the sector was privatised in November 2013. The power distributors include Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt, and Yola Discos.
Some of the generation companies include Transcorp Power Limited, Shiroro Hydroelectric Power Station, Sapele Power Plc, Ughelli Power Plc, Geregu Power Plc, and Kainji Hydroelectric Power Station.
About $2.5bn was the total amount earned by the Federal Government from the entire first phase of privatisation in 2013, involving both the generation companies and distribution companies.
According to reports, the total earnings from the privatisation, via the contentious sale of stakes and concessioning of six of the generation companies, brought into government’s coffer was $1.269bn (N460.7bn) according to data from government, for the government, but the total for all 11 Discos is featured in the $2.5bn figure.
The growing anger and pervasive feeling of the consumers is that the privatisation has not brought any significant change to the woes of consumers who have continued to grapple with darkness.
According to James Chijioke, President, Electricity Consumers Association of Nigeria, the power sector has been a whole tale of frustration and disappointment since the privatisation of 2013, as there is no growth, and this becomes all the more frustrating especially when set against the electricity needs of Nigerians; there’s a gaping hole and a huge chasm.
“The government and some operators in the sector may say there is some form of growth, but in actual terms, how many people are really benefiting from the privatised power sector? Most SMEs, (Small and Medium Enterprises) in Nigeria are still running their businesses on generators, as well as large scale industries.
“The number of people who need power has increased tremendously when compared to the rise in electricity output from the industry. So overall, there is no significant growth in the sector since it was privatised and this is annoying when you consider the humongous funds that have gone into that industry,” he stated.
This view was shared by no less a person than Uket Obonga, the National Secretary, Nigeria Electricity Consumer Advocacy Network.
Recently, he was quoted by Punch as saying “Can you say there is an improvement? If you have the kind of abysmal growth that is being experienced in the power sector for about 10 years, which on the average is about 1.3 per cent annual growth, would you say it is good? It is abysmally low!,” he stated.
“There is no serious growth there. It is about 1.3 per cent annual growth and this has been so for the past 10 years. In fact, since 2010 till about February or March this year, the annual growth in the power sector is about 1.1 per cent.
“So there is nothing to celebrate about that. It is not something remarkable. Our demand for electricity far outweighs that quantum of power generated during this 10-year period.”
Many industry analysts believe the challenge is not the scarcity of funds but poor management of the industry by those entrusted to do the managing and corruption.
Regulator inefficiency linked to rot
Dr. Olufemi Omoyele, an analyst told EnergyDay that at the heart of the bedeviling crisis in the sector is a lack of adequate monitoring and evaluation. He believes that even when resources and money are deployed there’s no proper monitoring.
“Without monitoring to make sure the funds are used for what they are meant for, we can not blame them if they fail to deliver on their mandate. This typical Nigerian character of throwing money without proper monitoring has also seeped in to the sector”, he said.
Omoyele stated that checks have revealed that about $50billion had been sunk into the sector without making significant impact, adding that:
“It’s on record that government has spent over N2.8tn into the sector as subsidies, this is aside about $10bn into the industry in the last 10 years, just to ensure that the power grid delivers.
“These monies are inclusive of those from foreign and local institutions, Recall also that government has equally injected funds through the so- called Special Purpose Vehicles in the National Integrated Power Projects.
“Private organisations, development agencies and others have also invested in Nigeria’s power sector. So when you want to put all that together, not less than $50bn has been injected into the power sector in the last 10 to 15 years,” he stated.
Many experts believe these funds are enough to get the sector functioning , and create enabling environment for businesses to thrive since they will no longer rely on diesels and other forms of electricity generation that eat deep into their profits margins.
“Now, having said that, as we speak today, the maximum capacity of the national power grid is about 5,800 megawatts. That is the maximum capacity that the grid can deliver to over 200 million people in Nigeria.
“So why won’t an average power user in Nigeria be angry about this? How can you spend this much on the sector and up till now over 80 million people in Nigeria still don’t have power? What was really the essence of the privatisation then?,” he asked.
The government has been giving money without monitoring and adequate supervision.
These varied monetary interventions ought to have made a difference according to analysts, because in total it exceeds N7tn, especially when we count bailouts and subsidies, whereby the government provides financial assistance to Gencos and Discos to cover operational costs and debt obligations.
It has also intervened through setting tariff by influencing the Multi-Year Tariff Order that determines electricity prices, though not directly controlling it.
Subsidy a thorny one
Federal Government allegedly expended about N375.8bn on subsidy on electricity in nine months- between January and September 2023t, as power consumers were said to have spent a total of N782.6bn for the commodity during the same period.
The report also showed that It DISCOs billed electricity users a total of N1.06tn nationwide during the nine-month period, but collected N782.6bn despite the blackouts in many parts of Nigeria.
On subsidy payments, according to report in the first quarter of 2023 the Federal Government subsidised power by N36bn, this increased to N135.2bn in the second quarter, and jumped to N204.6bn in the third quarter. Figures for the fourth quarter are not not because we are still in the fourth quarter of 2023.
Providing reasons for the subsidy in its just released third quarter 2023 report, the NERC stated that it was due to the absence of cost-reflective tariffs.
It said, “In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding. This funding is applied to the NBET (Nigerian Bulk Electricity Trading company) invoices that are to be paid by Discos.
“The amount to be covered by the Disco is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation in the periodic Tariff Orders issued by the Commission.
“It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N204.59bn in 2023/Q3 (average of N68.20bn per month), which is an increase of N69.37bn (+51.3 per cent) compared to the N135.23bn (average of N45.08bn per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy to harmonise exchange rates.
“The rise in the government’s subsidy obligation meant that in 2023/Q3, Discos were only expected to cover 45 per cent of the total invoice received from NBET. For ease of administration of the subsidy, the MRO is limited to NBET only with the MO (Market Operator) being allowed to recover 100 per cent of its revenue requirement from the Discos.”
It was also observed that during the three quarters: first, second and third, the electricity bills from Discos to consumers were N349.55bn, 354.61bn and N359.38bn respectively. The total bill for the nine-month period was N1.06tn.
In its latest third quarter 2023 report, the NERC stated that “the total revenue collected by all Discos in 2023/Q3 was N267.61bn out of N349.55bn billed to customers.
“This translates to a collection efficiency of 76.56 per cent, which represents an increase of +1.02 basic points when compared to 2023/Q2 (75.54 per cent). The increase in collection efficiency can be attributed to the implementation of various collection campaigns for improved remittance by post-paid customers.”
NBS, NERC gives report
Data from the National Bureau of Statistics showed that the rich/high income households have a higher electricity consumption pattern than their poor neighbours.
According to NERC subsidy payment for the poorest 20 per cent in the non-maximum demand consumers, mainly residentials, was at measely N0.43bn, while the richest 20 per cent cost N17.24bn in subsidy payment by the government in the Q1 2023. The middle income group also accounts for N3.36bn in subsidy.
By Q3, 2023, the richest 20 per cent counted for N117.8bn, while the poorest 20 per cent benefitted only N2.97bn. These figures show clearly that the electricity tariff subsidy has been disproportionately benefiting the rich Nigerian consumers, while excluding the poor ones the subsidy itself was designed for.
Adebayo Adelabu, minister of power must do to rejig the electricity ecosystem for efficiency and efficient supply of electricity .