Tariff Hikes Alone Won’t Solve Liquidity Crisis – Akande

Former presidential spokesman, Laolu Akande, has said that unless there is a significant cashflow into the electricity sector, besides tariffs, Nigeria would continue to struggle with delivering optimum power supply at a good price.

Akande stated this while tracing the problems bedevilling the power sector to the privatisation of both the distribution companies (DisCos) and the generation companies (GenCos).
Speaking on a Channels Television news programme, the anchor of Inside Sources explained that a review of the privatisation process is necessary.

The veteran journalist noted that the incompetence of the investors who bought over the DisCos and the GenCos led to the current problem in the Nigerian power sector.
Proffering solutions, he said, “First and foremost, we should have an all-society approach to this problem. Namely, that, look, this is a failure of both the public and private sectors. The public didn’t sell to the right people.

“The people who bought it couldn’t run it. As a matter of fact, there was a time that was insolvency. So, we need to solve that problem. We need to come together and say, what are we going to do? We need new investors to come into the business.

“And also, we need new ideas. Some people have suggested an energy fund which can be used to also solve some of the liquidity crises in the sector and then we need the Siemens deal, the Siemens initiative, to move faster so that we can have repairs of the transmission lines and the distribution lines.”

Explaining why the power problem has continued to linger, he said, “I think just like quite a number of national challenges, we have not been able to go to the root cause of the major challenge in the power sector, which in my view, and in the view of many of the experts, is the problematic privatisation sale of the discos, especially the GenCos.”

Describing the current situation of the electricity companies in the country, he said, “What you have is a situation where those who purchased the discos don’t have the technical competence and they also lack the financial muscle to be able to invest in the business. And so, there is a liquidity crisis, a clear liquidity crisis in the sector.

“There is no cash flow that does not encourage investment. The attempt to increase the tariff is actually a way that NERC and the companies are trying to solve the liquidity crisis. So, in my view, the main problem is that we have not looked at how can we fix the faulty privatisation sale that took place some time ago in this country.

“That is the fundamental problem and it has to be addressed.

“So I think it’s important for all Nigerians to understand that now the power sector is a business. And so there has to be a cash flow for the people in the business. I think the government has tried to explain that the recent tariff hike is only for about 15 per cent of the consumers in a particular category.”

On the outcry that followed the recently increased tariffs of electricity consumers in a certain category, Akande said, “The problem, however, is that the Nigerian people do not see the delivery of effective service from the discos to warrant any kind of increase. And like I said, the problem that we have with the discos is that they don’t have the financial model, they’re not putting in the money, for instance, to fix some of their own equipment.

“And they are still doing estimated billing for the better part. And so the people don’t see the services for which they pay. But quite frankly, there will be a need for some kind of resources and money coming into that sector.

“And the government is saying, let us see how we can increase tariffs for those who can pay, and we can show some services. All right. I would suggest that it would be useful to also find other means of bringing in resources and finances into the sector outside of tariffs.”

Recall that electricity consumers in Nigeria have expressed their displeasure over what was described as an over 300 percent increase in tariffs for certain categories of consumers who enjoy 20 hours of electricity in a day.