Nigeria: Electricity Tariff Increase - Paying More for Less!

14 January 2020

In Nigeria "419" refers to the section of the Criminal code which covers con-artists and fraudsters. Offences under this section are charged as "obtaining under false pretenses" or "advance fee fraud". The United States Federal Bureau of Investigation (FBI) defines advance fee fraud as "a scheme in which victims pay money in anticipation of receiving something of greater value in return... and receive little or nothing".

In Nigeria irate electricity consumers have taken to using this definition to describe pre-paid meter electricity billing. Their justification is that there is no guarantee any power will be available after electricity units have been purchased, because electricity distributing companies simply don't have the capacity to provide the volume consumers pay for in advance. Truthfully consumers nationwide experience electricity blackout for weeks despite their meters being in credit. As is stands Electricity distribution companies appear not to be under any serious obligation to provide electricity other than how and when they see fit!

The Nigerian Electricity Supply Industry (NESI) underwent many changes in 2005 with the implementation of the Electrical Power Sector Reform Act which was passed to in order to facilitate what was described at the time as one of the most ambitious privatization programs in the global power industry. The Act unbundled the former Power Holding Company of Nigeria (PHCN) into 11 electricity distribution companies (DisCos), 6 generating companies (GenCos) and a transmission company (TCN). It also created the Nigerian Electricity Regulatory Commission (NERC) mandated to ensure that electricity operators provide quality services to customers through an efficiently managed electrical supply industry which provides stable adequate and safe electricity supply.

After fifteen years the Commission is yet to fulfill this mandate. The abysmal state of electricity supply in Nigeria has been aptly described as a national embarrassment. NERC lists 15 "rights" of electricity consumers including the "right" to electricity supply in a safe and reliable manner; the "right" to properly installed meters for correct billing; and the "right" to be notified in writing before any disconnection can be made. In spite of the fact that these "rights" are regularly breached without sanction, NERC consistently approves tariff increases. The latest increase effective April 1st 2020 means that electricity tariffs have risen by over 300% in five years. Consumers have every right to be upset. They are being asked to subsidize the industry by paying even more in spite of grossly sub-standard service.

NERC themselves previously asserted that DisCos and TCN are responsible for the poor supply despite increased generation. They affirmed appallingly that over half of the electricity generated in Nigeria (58%) is lost and not put to use because of problems with the limited transmission network. As it stands consumers purchasing electricity units are paying for a product which DisCos cannot guarantee to provide. Knowing full well that unpowered pre-paid meters limits their income, they resort to restricting the supply of meters which have been paid for in advance, and busy themselves calculating outrageous "estimated" bills for electricity not consumed.

It's hardly surprising that irate electricity consumers have taken to referring to DisCos operation as "419". They are in effect sitting on billions of Naira from consumers on the promise of providing an intermittent service at some indeterminate time in the future! Ironically the key to managing DisCos profitably is aggressive pursuit of income from estimated billing and sales of pre-paid electricity units to be delivered whenever convenient, while simultaneously minimizing both capital investment and expenditure on broken down equipment, supplying meters or actually supplying electricity!

The Association of Nigerian Electricity Distributors (ANED) claims that the higher tariffs are meant to cater for revenue shortfalls, but a cursory glance at the new tariff regime raises more questions than answers. For reasons yet to be explained the percentage increase isn't uniform nationwide. It ranges from N7.81 in Jos to N20.90 in Port Harcourt. These tariff adjustments habitually ignore the fact that consumers are entitled to recover expenditure which should have been made by DisCos in the first place.

Property owners connecting electricity to their homes are made to pay for poles, electrical cables, fuses, electricity meters and "connection fees", and sometimes even asked to contribute towards repairs of community transformers. Leading socio-economic development experts contend that electricity is of far more importance than petrol to a modern economy because constant electricity is crucial to modern industry and agriculture. Therefore the requirement for the poorly performing GenCos, TCN and DisCos to all function efficiently is imperative. It's no news that the TCN constitutes a bottleneck as it lacks the capability to transmit the12,000 mega-watts which GenCos generate.

In their habitual fangled English NERC officials say that they are "working in addressing the DisCos / TCN interface challenge with the aim of freeing up the generation capacity constraints by addressing the bottlenecks inhibiting the flow of energy". In layman's language this means that the system isn't functioning correctly and customers are being asked to pay for its inefficiency. Perhaps it's time to reassess the botched privatization process which most likely will never lead to the affordable uninterrupted power supply the nation urgently requires to modernize. It's difficult to be convinced that those in authority fully grasp the problem.

The backslapping claim by the Minister of Power that Nigeria is on course to provide 11,000 mega-watts which will give everybody "sufficient electricity" is dismaying to say the least. South Africa which has approximately the same land mass as Nigerian and 130 million fewer people is dissatisfied with the inadequacy of their 51,309 mega-watts installed capacity and plans to add an additional 19,400 of new renewable generation by 2030.

Nigeria should be aiming for 100,000 mega-watts not 11,000! Without better planning and target setting inadequate power supply will continue for the foreseeable future, DisCos will continue to be accused of advanced fee fraud and consumers will continue to be asked to pay more for less electricity.

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