Will This New Tariff Increase Turnaround Nigeria's Electricity Troubles?

The recent decision by the Nigerian Electricity Regulatory Commission (NERC) for a 300 per cent tariff increment for Band A consumers of electricity, following the removal of subsidies totalling N240 billion per month, has sparked a widespread debate and divided public opinion. These customers, according to the regulator, receive up to 20-24 hours power supply daily.

The increment came after the Federal Government also increased the wholesale price of gas to power plants by 11 per cent. Personally, I believe this move represents a critical juncture in the ongoing efforts to reform and improve Nigeria's electricity supply, though the implications are complex, far-reaching and require a trip down memory lane.

The National Electric Power Authority (NEPA), the defunct state-owned power utility company, was long plagued by inefficiency, corruption and an inability to meet the country's growing demand for electricity. NEPA's woeful failures, despite billions of dollars in fresh investments during the Olusegun Obasanjo presidency (19992007), cast a dark shadow over the sector, leaving businesses and households alike nationwide grappling with the consequences of an unreliable power supply.

The decision to privatise power generation and distribution in 2013 by the Goodluck Jonathan Administration was seen as a potential solution to NEPA's woes. The Federal Government believed that by attracting private investment and fostering competition, the sector would become more efficient, reliable and responsive to the needs of consumers, but sadly, this has not been the case nationwide. The emergence of Generation Companies (GenCos) and Distribution Companies (DisCos) promised a new era of accountability and improved service delivery.

However, the privatisation process was not without its challenges. Allegations of a lack of transparency and the involvement of politically connected individuals raised concerns about the true motives behind the restructuring. As a result, the new players that emerged often lacked the experience, capacity, and know-how to effectively transform the sector.

Despite the privatisation efforts, Nigeria continues to grapple with persistent power failures, leaving businesses and households alike struggling to cope with the unreliable electricity supply. The gap between demand and supply remains vast, with many communities enduring prolonged outages and erratic service. For the last two weeks, we have scarcely enjoyed more than an average of four hours of public power supply in my estate despite being a so-called Band A customer.

The situation is similar across homes and businesses. This status quo has had a significant impact on the country's economic growth and the daily lives of its citizens, forcing them to rely on expensive and environmentally-damaging alternative power sources.

The recent tariff increase, coupled with the removal of subsidies, has added to the financial burden on consumers. While some argue that this is a necessary step towards a more sustainable and cost-reflective pricing model with over N200bn in monthly savings, others contend that it places an additional strain on households and industries already struggling with the challenges of an unreliable power supply system.

The government's role in the power sector's challenges cannot be overstated. The privatisation process was not as transparent as the telecoms sector's privatisation, where experienced and capable operators were given the responsibility to run the licences. This lack of transparency, combined with the government's reliance on subsidies to keep the GenCos and DisCos afloat, has contributed to the sector's current difficulties.

Furthermore, the government's own debts to these companies, with the Nigerian Bulk Electricity Trading (NBET) Plc reportedly owing the GenCos over N1.64 trillion, have hindered the ability of these entities to operate optimally. This situation has created a vicious cycle, where the GenCos and DisCos struggle to invest in infrastructure and maintain service levels due to government's outstanding payments.

Government's actions, or lack thereof, have been a significant factor in perpetuating the power crisis. Delayed payments, insufficient regulatory oversight, and a failure to address systemic issues have all contributed to the sector's woes. As the Federal Government moves forward with the tariff increase and subsidy removal, it is crucial that they demonstrate a renewed commitment to transparency, accountability and a collaborative approach with the private sector.

Adequate metering is another critical component in ensuring transparency, accountability and fair billing in the power sector. The proliferation of prepaid metres is essential in ensuring that consumers pay for the actual electricity they consume, reducing the burden of estimated billing and electricity theft. However, the slow pace of metre deployment remains a major challenge, underscoring the need for accelerated efforts in this regard.

As Nigeria navigates this complex and contentious issue, it is clear that a more comprehensive and transparent approach is needed to address the power sector's challenges and to unlock the sector's potential to deliver the reliable electricity supply that the citizens deserve and that the country so desperately needs to accelerate economic growth.

The recent tariff increase and subsidy removal represent a significant shift in the government's approach to the power sector. Proponents argue that these measures are necessary to ensure the financial viability of the GenCos and DisCos, enabling them to invest in infrastructure and improve service delivery. They contend that the burden on consumers is a short-term sacrifice for long-term gains in the sector's performance.

Government must address its own outstanding debts to the GenCos and DisCos, clearing the backlog of payments and providing a stable financial foundation for these companies to invest in infrastructure upgrades and service improvements