The ‘Bandits’ In The Power Sector, By Kazeem Akintunde
The Federal Government caught many Nigerians unawares days ago when it hiked tariff on electricity for customers in band A. The government told shocked Nigerians that there are some lucky ones among us that are enjoying up to 20 hours of electricity out of the 24 hours we have in a day, and in that wise, they are henceforth expected to pay more for such ‘luxuries’.
The lucky few have now been asked to pay N225 per kilowatt of electricity consumed instead of the old rate of N65 per kilowatt. Adebayo Adelabu, Minister of Power, said that the policy would only affect 1.5 million electricity consumers out of 12 million consumers all over the country. The remaining 10.5 million customers who are not as lucky to enjoy 20 hours of electricity a day would continue to enjoy government subsidy of electricity pending when all electricity consumers are provided with power for up to 20 hours a day within the next three years. This means that every Nigerians would pay the newly announced rate by 2027, all things being equal.
Adelabu did not fail to tell us that even at N225 per kilowatt, the rate is still far cheaper compared to using diesel engine or fuel-powered generators to generate power which cost between N450 and N500 per kilowatt. With the increment, Adelabu stressed that the federal government would, for the very first time, be taking a bold step to address the fundamental issues confronting the power sector, including liquidity and pricing challenges. The federal government, we have been told, is subsidizing 67 per cent of the cost of electricity in the country and that if the cost reflective tariff is not introduced, government would have to pay N2.9 trillion this year as electricity subsidy.
That figure, Adelabu said, is more than 10 per cent of the national budget. “It will be insensitive on our part to compel the government to pay such when we have other competing issues the government needs to fund but with limited resources”.
Beautiful rhetoric from the government. One wonders if they are also looking at the cost implications for the consumers as well as their ability to pay? If we are to break it down into naira and kobo, what it would cost those consumers on Band A to enjoy electricity for a minimum of 20 hours would amount to a staggering N5,400 per day, which translates into N162,000 in a month and an astounding annual electricity bill of N1.971.000.
Yet, we are in a country where the minimum wage is a meagre N30,000. Or is the federal government saying that there are no poor Nigerians living in areas designated under band A?
As expected, many Nigerians have condemned the tariff hike, insisting that the necessary infrastructure to support the delivery of 20 hours of electricity to those in Band A have not been put in place but the government is rather interested in hiking the tariff without commensurate service delivery.
Here is a country where we are still grappling with electricity generation in the 21th century. We have not been able to generate more than 7,000 megawatts in a country of over 200 million people even after wasting several billions of dollars. Even at that, the epileptic grid system that will have, does not have the capability to transmit all the generated megawatts to consumers without developing hiccups. Some of the 11 Distribution companies in the country only exist in name only, as most of them are practically dead.
For the most of part of last week, the country generated and distributed less than 3,000 megawatts as gas shortages crippled many of the electricity generation stations run on gas. Many Nigerians still do not have access to pre-paid meters, and they have to pay through estimated billings. Yet, what they pay monthly in most cases is not in consonance with the amount of energy consumed, and they are still being asked to pay more.
Although it is obvious that the poor are being deceived by their leaders that only consumers in Band A would be paying the cost reflective tariff, it won’t be long before others will be forced to pay the same rate.
The International Monetary Fund (IMF) and the World Bank that have been urging the government to increase tariffs would be happy now but I doubt that President Bola Tinubu is aware of the economic pressure many Nigerians are going through since his assumption of office. The removal of fuel subsidy as well as the unification of the dual exchange rate of the naira compounded the misery of most Nigerians. They are gradually being pushed to the wall and unless there is a human face to many of his policies, his re-election in 2027 may be in jeopardy as people that would vote for him are almost dead due to his harsh economic policies.
The Breton woods institutions that are egging him on have various ways through which they cushion economic hardship on their own citizens. In the United States of America (USA), there are government subsidies on the domestic agricultural sector, oil and energy producers, the housing sector, automakers, and some healthcare known as Medicare, introduced by the Obama administration.
Energy subsidies in the U.S may be direct cash transfer to suppliers, customers, or related bodies, as well as direct support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions, and limits on market access. Indeed, the International Renewable Energy Agency tracked some $634 billion in energy sector subsidies in 2020, and found that around 70 per cent were fossil fuel subsidies. About 20 per cent went to renewable power generation, six per cent to biofuels and just over three per cent to nuclear.
It is the same scenario in the United Kingdom, where there is government subsidy on several sectors such as health insurance, technology, housing, education, electric vehicles and sustainable solutions, among others. They provide such subsidies via loans, grants and tax credits, among others. In the area of power, Britain paid almost 40 billion pounds in energy subsidies since it began to help households and businesses cope with the surge in power bills after Russia’s invasion of Ukraine. Between the launch of the scheme in October last year and March, nearly 21 billion pounds was spent on the Energy Price Guarantee (EPG) programme that supports households with their bills. A further 12 billion pounds was paid under the Energy Support Scheme, which offered homes payments of 400 pounds towards their bills over the winter months. The Office of National Statistics has put the cost at 41.2 billion pounds in the financial year ending in March 2024.
Germany, Italy, Canada and even South Africa are countries that are still paying some form of subsidy to their citizens. Tinubu came on board and ended the fuel subsidy regime. The country is still reeling from the impact of that policy. Cost of food and other essential commodities have hit the roof. Half of the amount that the government saved from the removal of fuel subsidy was used to provide palliatives for the same people again. More than half of the palliatives provided ended up in the hands of those that don’t need it while the real masses became more desperate. It was not long before hungry and angry Nigerians started looting government warehouses where everything on site were looted. To eat is now more difficult for many than even when the country was at war.
Their misery is about to be topped up with the shenanigans in the power sector. In Nigeria, it is a crime for the government to support the poor. What most of our leaders don’t know is that by supporting the poor, they are actually helping themselves as it would ease pressure on their administration. Since the coming on board of the Tinubu government, the masses have been at the receiving end of economic policies that makes life difficult for them. In spite of the fact that a whole ministry was created named Ministry of Humanitarian Affairs and Poverty Alleviation, those in charge of the Ministry since its creation during the reign of President Muhammadu Buhari are wicked souls who are more concerned about their private pockets. It was no surprise when the Economic and Financial Commission (EFCC), announced that it has recovered N30 billion from top officials of the Ministry while 50 bank accounts are still being investigated. A former Minister in the ministry, Hajia Sadia Umar Farouq, as well as newly appointed but now suspended Betta Edu, are subjects of investigation by the anti-graft agencies.
In spite of the several billions of dollars sunk into the power sector since 1999, we still have little or nothing to show for it. Despite international bashing particularly from South Africans who tagged us ‘Generator Republic’, our leaders still lack an idea on how to remove the shameful tag by providing its citizenry with constant electricity. After wasting over $40 billion on the power sector, we are now looking for foreign investors that would bring in funds for the same sector. And to attract the investors, we have to ensure ‘appropriate pricing’ of power so that those investors will recoup their money within a short period of time. Nothing good will come out of it.
Perhaps it is time for us to send some of our officials to Morocco to understudy that country on what they are doing right in the power sector. The war between Russia and Ukraine has catalysed Europe’s politicians to increase efforts to tackle climate change with new sources of clean energy. Morocco is positioning itself to be part of the solution. It is on Europe’s doorstep, and has ambitious plans to generate 52 per cent of its electricity from renewable sources by 2030. The hope is that lots of this electricity will be exported via undersea cables to Europe. The country is presently building one of the largest solar energy farms in the world. It is also working towards generating electricity through wind farms.
Back home in Nigeria, corruption has retarded our thinking. We think more of how to shortchange the system than build it. The ‘bandits’ in the power sector, with their foreign collaborators, have convinced Tinubu that complete removal of subsidy on power is the way to go. I wish him well. I simply hope that his harsh economic policies will not haunt him in 2027.
It is time for state governors to take the bull by the horn and deliver 24-hour power supply to their citizens. Prof. Barth Nnaji and his Geometric Power Limited are doing wonders in Abia State. The state is off the national grid as they have enough power for the entire state. If smaller states can do it, there is nothing stopping each of the six geo-political zones from working together to achieve the same objective. Without electricity, we will still be deceiving ourselves on any planned industralisation of the country. The current classification of households to Band A, B, C, D, and E should shame all of us. That is not the way to go.
See you next week.
