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The recent collapse of the national grid, which resulted in power outages across the country, is the 131st time of such incident since the power sector was privatised in November 2013, and the fifth time of such system collapse in one year. The development has pushed production costs and living expenses to new heights. Our Ease of Doing Business (EoDB) has sharply dropped.
The power outage indicates that the power sector reforms are not yielding the expected results. It also points to the need to urgently revamp the deteriorating power infrastructure. According to the projection of the World Bank, amid the poor power supply in Nigeria, businesses in the country have reportedly lost over N96.4trillion (about $232billion in the last eight years since the sector was privatised. Power supply has worsened, while the key players in the supply chain, the Transmission Company of Nigeria (TCN), the Nigerian Bulk Electricity Trading Company (NBET) and the distribution companies (Discos), are engrossed in blame game. Recently, TCN blamed the Discos of “reneging on all performance agreements that have put the sector in a fix.” Businesses are reported to be losing about $29billion yearly due to unreliable electricity.
The losses are almost double the N76trillion cumulative national budget from 2015 till date. Data from the Manufacturers Association of Nigeria (MAN) showed that about 320 firms were shut between 2019 and 2020 due to poor power supply, while many others relocated to neighbouring West African countries for the same reason. Also, Small and Medium Enterprises (SMEs) that depend on diesel are struggling to survive as a result of the scarcity and high cost of the petroleum products.
In the South East, businesses have virtually collapsed. The Enugu Electricity Distribution Company (EEDC) that supplies electricity in the zone has blamed the situation on government’s inability to pay for generated electricity. The latest national outage came a few days after the Generation Companies (Gencos) raised the alarm over idle capacity and mounting debts, estimated at N3.7trillion and called for fresh investment. Nigerians are tired of the lame excuses given by the various agencies/regulators mandated to ensure energy supply in the country. It is unfortunate that more than eight years after the privatisation of the power sector by the Federal Government, concerns are mounting over the worsening state of electricity supply in the country.
Power generation is yet to match the installed capacity of 13, 014 MW. Energy generation to the national grid as at last weekend was less than, 3,000MW. Recent data from NBET showed that in eight years, electricity consumers had spent about N5.7trillion on tariffs. This represents an average of N720 billion worth of electricity, with some subsidy from the government. This year, the 15-year multi-year tariff order (MYTO) will be up for review, yet NBET that oversees the implementation of MYTO does not seem to have the capacity to muster the necessary capitalisation to guarantee huge transactions.
By next year, the 11 electricity Discos will have a new deadline to review their monthly bills after the government had on several occasions given them a lifeline to stay afloat. The Central Bank of Nigeria (CBN) had also provided critical intervention funds of over N1.5trillion to the sector. The government has spent about N1.7 trillion on the sector, with plans to spend additional $3billion. It is sad that after showing initial promise, the Discos have failed to inject the required capital to the sector grappling with obsolete equipment. Only recently, the Minister of Power, Abubakar Aliyu, said the performance management of the Discos had been fully transferred to the Nigerian Electricity Regulatory Commission (NERC) from the Bureau of Public Enterprises (BPE) since January this year. He disclosed that underperforming Discos must be sanctioned.
Although liberated from state bureaucracy, the power sector still contends with numerous challenges. These include gas supply, inadequate metering, unpaid electricity bills and ailing transmission network. All of these, including corruption and lack of political will, limit the power sector reforms from meeting the set objectives. The rising cost of electricity has raised the cost of production, with its multiplier effect on the cost of essential items. The government must find lasting solution to the nation’s worsening power supply. Electricity remains the catalyst for economic growth. But Nigeria cannot develop industrially with the current epileptic power supply. Last year, Nigeria was listed among the top 20 countries in the world that lacked access to clear fuel technology for cooking and industrial uses. That is a marker of underdevelopment.
Therefore, urgent action is needed to shore up power supply through other sources of energy such as nuclear, solar and wind. The thermal plants and turbines across the country are often short of gas supply, as gas producers prioritise selling to industries which can settle the bills. Going forward, there is need to review the privatisation contract and provide stiffer penalties against Discos that are not meeting their obligations. Revamping the power infrastructure requires more investments and replacement of obsolete equipment.
Since investors go to where power supply is steady, the government must ensure that Nigerians have steady power supply. With uninterrupted power supply, the economy can grow beyond the projected annual growth rate of 2 per cent.
