14 June 2012

Nigeria: PHCN's New Tariff Regime


It is not strange that the Power Holding Company of Nigeria's introduction of a new tariff regime, effective June 1, has been generating a lot of negative reactions. Nigerians simply don't trust their government.

The general feeling is that the new tariff constitutes another tax-and-spend contraption meant to increase the size of the loot public officials share at the expense of the people. Few people have bothered to closely examine the details of the new tariff, especially when the power ministry hinted at some kind of subsidy for the poor.

That toxic word "subsidy" didn't go down well with Nigerians who are still reeling from disclosures of massive looting of the nation's coffers under the guise of fuel subsidy.

A close examination of the new tariff regime, however, suggests that the scheme may not necessarily be as anti-people as it looks on the surface. For example, rural dwellers and poor people in urban areas who consume 50 kilowatt hour or less per month will be required to pay N4 per kilowatt hour instead of the N7 they currently pay.

Meter maintenance charge has been abolished and meters will now be provided free of charge to consumers. The new tariff requires the middle class, who constitute 80 per cent of power consumers in Nigeria, to pay N11 per kilowatt hour while industries and rich consumers will pay much more than they are currently charged or, to repeat government's coined euphemism, "cost-reflective tariff".

Away from the debate about the propriety of the new charges, the question on the lips of most Nigerians is whether the new tariff will guarantee regular power supply or if it is just another ploy by the government to further fleece the people. Here, the point must be made that Nigerians have come to terms with the fact that they have to pay for the services they enjoy.

The point is not simply about the cost of electricity as it is about availability and reliability. It is much more expensive to run generators. Nigerians would rather have 24-hour power supply from the public grid than generate their own power.

The Manufacturers' Association of Nigeria estimates that Nigerian industries privately generated more than 4,000 megawatts in 2010 alone! The high cost of such generation is clearly not sustainable.

The goal posts of regular power supply have shifted so many times over the years that the cynicism of the people is understandable.

If the new tariff will ensure that PHCN is able to settle its more than N400 billion indebtedness and provide constant power supply, then, it would have been worth it. Otherwise, government would be asking for trouble if all the new tariff brings in its wake is darkness.

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