It must be clear to all by now that the Nigerian Power sector is still in a shambles after years of alignment and re-alignment. Since the advent of democracy in May 1999, the nation has expended colossal amount of money, running into several billions of dollars (about N2.7trn), which culminated in the privatisation of electricity in 2013. But, this has failed to provide reliable electricity supply to the economy. Also, despite the huge funds sunk into the sector, and its huge potential, the sector has not been able to attract investors, especially foreign core investors.
One suicidal idea or quack remedy which is now being peddled in the country as a means of solving the electricity crisis or to attract investors to the sector is to hike the electricity tariff.
Certainly, increasing the electricity tariff perse is not a panacea for solving the electricity debacle and will not in any way attract investors or salvage the appalling situation of the power sector. You cannot talk of increasing the tariff when the sector is still disorganised. This will only worsen the already bad situation.
Undoubtedly, what took place in the power sector in 2013 under the Jonathan government was a stage-managed auction of public utility to achieve a desired outcome rather than privatisation in the real sense.
This was why no single foreign core investor came to invest in the Sector, except some foreign staff; not because of the tariff as is wrongly alleged in some quarters. The true position is that the Nigerian electricity tariff is amongst the highest in the world. But it must be clear to them that the Nigerian power privatisation was a sham and doomed to fail.
The core investors in the power sector are Nigerians who know next to nothing about the electricity business and are after the assets of the power sector to make quick profit and reap where the did not sow.
As things stand, the only viable alternative open to the government is the complete reversal of the privatisation process and to reshape the power sector anew with appropriate organisation conditions-by designing and installing organisational variables with policies at their core, as provided in my recent article, entitled “Agenda for the Buhari government to fix Electricity in the Next Level”. And permit it to run on full commercial lines for a period.
There is therefore, absolutely no basis for further increase in the electricity tariff at this critical time when the economy is in perilous state and consumers are struggling to pay through the nose, just because of the deficiency of the organisational structure and policy misconceptions in the power sector.
Under-utilization of resources such as manpower, money, materials, machines, and methods are commonplace in such an industry in Nigeria. And it is this inefficiency that the government is subsidising in the power sector. Thus this has resulted in the high cost of electricity production, hence, the high tariff. Certainly, if the power sector is properly structured and organized as a viable industry, there is no reason why it should not provide cheap and stable electricity supply to the economy 24/7 at the current installed generation capacity in the country. It could also undertake other complementary businesses to electricity generation and supply, such as retail activities in electrical/household appliances and other ventures to boost their revenue profile and for the consumers to enjoy reduction in the tariff, through efficiency and enterprise gains.
I must stress that to increase the tariff further when the power sector is disorganised is counter-productive and catastrophe. This will serve no useful purpose. Expensive electricity will mean expensive goods and services in the country. This will have negative multiplier effect that can stifle progress on all fronts. These impediments will discourage foreign business ventures from investing in Nigeria and this will not be in the interest of the Government that is working round the clock to attract new direct foreign investment into the country.
On the other hand, if there is available cheap and reliable electricity in the country, it will resuscitate our factories for efficient and optimal operations and rejuvenate other business, as well as increase productivity. It will also encourage local entrepreneurs to embark on SMEs which our economy desperately needs for growth.
From foregoing, it is very necessary and clear that there is urgent need for Buhari’s administration to urgently and in national interest, act decisively by reversing the shoddy privatization of the GenCOs and DisCOs, take them back into state ownership and permit them to run on full commercial lines for a short period of time, say about two to five years. This will reshape and place them on sound commercial footing, lay a firm foundation for the future and build a clean balance sheet.
As I said elsewhere, full commercialisation means the power industry will fend for itself. It will no longer be subsidised by government, but will instead be required to make profit and contribute to the government that owns it. Certainly, this is the best way out of the dilemma the country finds itself with its electricity industry.
Failure to tread this path might plunge us all further into desolation and poverty and that is not the road to development, security and prosperity, but to chaos. The earlier the privatisation is reversed, the better for the country. A stitch in time saves nine!
– Dr. Mohammed is a chartered engineer