Nigeria’s unreliable electricity supply has remained a key disincentive to business productivity and investments thereby stagnating economic growth and development. Several studies have shown empirical evidence of how unreliable electricity negatively impacts output and productivity, job creation and new businesses, trade competitiveness, and volatility of the exchange rate regime.
Largely, electricity is the blood that flows to ensure that there is life in any nation; given its far-reaching multiplier effect on the economy, impact on socio-political and quality of life thus underpinning its salient catalytic role in productivity/GDP, sustained economic growth, and national security. This has led most Governments in underdeveloped countries to solely manage and or over-regulate (where the Power Sector has been privatized) the private Operators which in turn creates the vulnerability for the sector masked with regulatory policy inconsistency, uncoordinated government intervention one too many fueling mismanagements for the Operators leading its current state of quagmire.
Recently, the World Bank (WB) upon approving a $500 Million loan through the FGN to Electricity Distribution Companies for metering, improvement of financial support and network expansion for more access to electricity, etc. as its way of driving home the urgency (after several years of assessments) came out with survey figure suggesting that “85 million Nigerians are without access to grid electricity representing 43% of its population making her the country with the largest energy access deficit. WB further said that lack of reliable power is a significant constraint to citizens and businesses, resulting to annual economic losses estimated at $26.2 Billion (N10.1 Trillion) equivalent to about 2% of its GDP”. (culled from https://www.worldbank.org/en/news/press-release/2021/02/05/nigeria-to-improve-electricity-access-and-services-to-citizens).
This met with a swift reaction from the Dr. Ahmad Zakari (Special Adviser to the President on Infrastructure) challenging WB source of data, saying that their survey was baseless quoting NERC figures confirming that only 55% of customers connected to Band D &E under the Service Based Tariff (SBT) are below 12 hours supply. He further faulted the claims of $1.5 Billion annual subsidy on tariff shortfall.
A review of the Industry facts reveals that both parties are correct given their varying submissions, in a situation where the National Grid is generating about 5,000MW how many households or population can consume such? Global rule of thumb assigns 1,000MW to 1 million population, given Nigerian’s estimated population of about 200 Million and 42.9 million households please do the math- this is not rocket science, you cannot use “I better pass my neighbour” generator to power a 3-bedroom flat will three (3) air conditioners, freezer and other amenities. Likewise, households pay for electricity and still buy fuel to power their generators to make up for long hours of outages to which a stable supply should eliminate the cost of self-generation and reduce the subsidy on petrol (financing economic loss; the cost of self-generation is a major economic loss to the Power Sector and becomes more worrisome as Federal Government was subsidizing both electricity and petrol at the same time- until recently when petrol subsidy was stopped). The Discos cannot sell what they do not have moreover, the continuous attempts to stretch the low generation to meet the rising demand for supply creates more damage to their network and the grid. Where then is the efficiency of the system?
Manufacturing contributed about 13% of Nigeria’s year 2020 GDP (Statista 2020) where Food & Beverages, Cement & Textile subsector accounted for over 77%, these sectors barely rely on the national grid. Clearly, any serious industry into manufacturing will use a generator (not the grid) for efficiency in production (for timely completion and avert production wastages) the incremental cost of production is normally passed to the consumer leading to increased economic losses and uncompetitive local production. Speaking of huge economic losses, several large industries/companies have been forced to relocate their operations/plants to neighbouring economies offering better power supply with clarity in their roadmap for attaining stable power supply and more importantly offering security for life and remittance of returns which contribute to reduced cost of production (low economic losses) and import parity pricing.
We must note that the emerging economies are driven by high growth and productivity, industrialization/automation, telecommunication- we lost Amazon and Twitter to South Africa and Ghana years back majorly due to unreliable power supply- ICT giants drive and will not build their Cloud backbone on the unreliable power supply. The race for Africa did not start today, Amazon in the last 10 years has been in Cape town, South Africa building its Data Center and backbone to drive its massive Africa e-commerce business and very soon Telsa will follow (I trust they will not want to see their cars stopping on our roads due to National Grid collapse). In this age where private companies are leading the race to Mars (Space adventure), Nigeria telecommunication companies cannot continue to use generators to power their base stations. The collective cost of self-generation of power remains a major economic loss not just to the Power Sector but for the entire nation.
In a nutshell, the “Power Sector holds the key to Nigeria’s Economic Diversification and Regeneration” and thus very special attention must be given to it if we have to survive as a nation. The need for synergy across board towards a common goal is long due, urgent initiatives towards the liberalize and decentralize the national grid is critical for stability in the value chain, Industry stakeholders and the Discos should look and enable policies for distributed generation and where possible promote regional and state grids as back-ups and drive economic survival of the productive sectors of the economy within their geographical locations to create more jobs, increase minimum wage and household income to allow households in-turn pay for their electricity then the cycle continues.
To the common man on the street, these arguments remain rhetorical as all he needs is a stable and reliable power supply for the home, to allow SMEs to operate, resuscitate industries to take back the factory floors and warehouses taken over by churches, position Nigerian products and trades for competitive advantage in the fully operational African Continent Free Trade Area (AfCFTA), improve productivity and employment that will restructure the Nigerian economy for a favorable foreign exchange market that will attract the likes of Amazon, Twitter, Tesla and address unemployment which by and large will improve the state of national security.
The urgent need to expand the productive base of the economy must have driven the recent initiative of the Presidency and Central Bank of Nigeria (CBN) et al to provide a single-digit loan to fund 1 million meters (under Phase 0-sourced locally) for the Discos to install free to their customers remains a laudable intervention (amongst several others they are working closely with the NERC, BPE) which has immediately impacted with the increase of market liquidity by N65billion in January 2021 as reported by Zakari such and many more inter-institutional/ministerial initiatives should be encouraged and seen through to ensure that the 10-12 million (author’s projected estimate) industry metering gap is urgently met. Kindly note that this gap is enough to create a new industry (create jobs, conserve foreign exchange and increase GDP) and thus the right policies should be in place so as not to lose this opportunity. This initiative remains an important case study for clarify in government policy offered on a platform of synergy across key government agencies and industry stakeholders to ensure a seamless achievement of the desired goals. To say the least the role of the CBN is critical given poor liquidity and more importantly the foreign exchange portion of the Capex (an estimated at 82% of equipment are imported), also we need the WB loan at this crucial stage of the economy and must ensure that implementation is strictly managed.
Permit me to first isolate one of the key elements (Electricity metering) amongst other factors * bedeviling the Power Sector to expand my position. Several metering programs have been challenged due to the poor liquidity in the industry and high custom duty charge (until recently addressed). Electricity metering has remained a critical factor towards the failure and success of the power sector be it in Generation, Transmission and Distribution as “what you cannot measure you cannot manage”. The industry’s Key Performance Indicators (KPIs) are driven by efficiencies in the reduction of loss either technical (delivery of the product), commercial (billing of product) and collection (quality of supply) the role of smart prepaid meters. Once we are efficient in the delivery, billing and collection of 5,000 MW of electricity across the value chain there is hope that a steady increase in power generation will be well accounted for and managed, thereby providing verifiable cash flow for both financiers & investors. This is enough ground to justify the intervention (amongst others being addressed) of the CBN Governor in his current drive toward the restructuring of the Nigerian economy- expansion of economic productive base via productive use of electricity.
The advantages which a proper smart prepaid metered network offers include but not limited to the following:
1. Most electricity consumed will be paid for;
2. Controlled use of electricity which will reduce waste and availability to other users;
3. Ease of management and detection of temper and theft;
4. Encourage Discos to investment in smart network management systems for prompt maintenance and fault detection and recovery.
In the wake of a looming tariff increase, customers will be better able to manage their electricity budget thereby increasing availability to more productive use of same and reducing energy theft. The desired impact to the industry will be instant and can only be sustained where the metering rollout is massive and networkwide, thus the initial rollout of 1 million is impressive but we must urgently liberalize the electricity metering industry (free prices to encourage investors into manufacturing), allow customers pay for smart meters (where they cannot wait) for an aggressive nationwide deployment to achieve economic advantages.
we urge the stakeholders to review closely the price-fixing policy for the cost of Smarts Meters in the light of volatile foreign exchange regime as this may truncate the massive rollout of the new metering program while also ensuring that services are first made available to clusters demanding productive use of electricity to boost economic regeneration.
While we confirm that the industry is being for once staired in the right direction, in my opinion, Government Agencies should be appraised base on the successes of the sectors that they oversee. The role of Government (executive, legislature & judiciary) and its Agencies is primarily that of an Economic Enabler – Government officials must see their task as that of business managers within government institutions formulating and managing policy frameworks that facilitate and protects the successes of businesses, enterprises and citizens.
Economic Enablers are to set and manage market-driven policies and directives (after due consultation with stakeholder) and prompt implementation of same while ensuring that there are linkages and synchronization of policies across all sectors of the economy to ensure seamless flow and guarantee ease of operations for businesses, monitoring for growth and ensure inviolability to prevent the exploitation of the common man or third parties.
*Please note, in subsequent series an attempt shall be made to x-ray other industry initiatives/policies that had made severe impact on the power sector namely -gas to power roadmap, delayed privatization of NIPP plants, electricity tariff & subsidy, refusal to privatize Transmission Company of Nigeria (TCN), lack of willingness on the part of government Agencies (MDAs) to clear outstanding electricity debt and prompt payment of current bills- leading by example, review of the current role and the need for government divestment in Nigerian Bulk Electricity Trading (NBET) Plc to allow for a market-driven Power Purchase Agreements (PPA) regime, Energy theft and continuous dependent on the National Grid system.