Nigeria’s electricity sector embroiled in protests over tariff hike

For those foreign investors who have keen interest in the promising Nigerian power sector, the ensuing conflict between consumers and suppliers of electricity would no doubt have captivated their interests. From the busy streets of Lagos to the cobbled ones in Abuja the capital city, labour union workers carried banners disrupting the easy flow of  traffic as they marched to the offices of  the  electricity  Distributing Companies, known as DISCOs, denouncing  the 45 percent hike in the tariff which commenced in February.

Not even the earlier plea of the Minister of Power, Works and Housing Babatunde Fashola, who insisted that the new price regime was beneficial to the ailing sector, dissuaded them.

Labour clearly had a bone to pick with the tariff hike especially at a time when the majority of electricity users in the nation are not billed according to usage but by estimation. If such continues, most electricity users would be disadvantaged, as any adjustment they embark upon to reduce their electricity consumption and bills would not be reflected. Hence, the resultant effect of the new tariff is that consumers would have no option but to pay more even if they consume little electricity. This is the reason why labour is demanding for a nationwide distribution of meters to consumers before the new tariff regime takes effect to ensure that consumers pay for what they use and not more. “The increase is going to affect manufacturers, medium and small scale enterprises and even consumers. Every consumer most be provided with meter because people should be able to pay for what they consume and not pay for darkness,” Aliyu Wabba, Leader of the Nigerian labour lamented to the media insisting that labour would call for a full strike if prices were not reverted back.

According to a memorandum of understanding said to have been signed by the stakeholders on November 1, 2013, a time frame of 18 months was stipulated for the metering of all electricity users. That time frame elapsed mid last year, with only a fraction of consumers being metered, while majority are still paying estimated bills that have even increased by over 70 percent in many parts of the country since last year. To add insult to injury, many consumers who paid for the prepaid meters are yet to receive them.

While these glaring lapses have not been rectified, it was somewhat puzzling to many that the Nigerian Electricity Regulatory Commission (NERC) approved a tariff hike. Little wonder many consumers treated the regulator’s repeated reassurances, that it would sanction companies who failed to adhere to high standards, with a pinch of salt. Some consumers have also noted that NERC’s tariff hike is in breach of a court order restraining it from doing such.

NERC and the electric companies are, however, insisting that the new tariff would make the sector attractive to investment. “The increase will help mitigate the negative cash flow and revenue shortfalls that have bedevilled the sector,” said Sunday Odutan, Executive Director, research and advocacy, association of Nigerian Electricity Distributors, in a statement to Nigerian online news platform Premium Times.

There is no doubt that Nigeria’s ailing power sector is in dire need of investment. The prolonged government dominance of the sector coupled with decades of underinvestment and poor management had brought the sector to its knees. Realising its mistakes, the government decided to let go of its rein with the Electric Power Sector Reform Act of 2005, which established NERC as the regulator, while splitting the sector to three: generation, transmission and distribution.

Since then, the nation have not generated more than 5,000MW, creating the biggest gap between supply and demand for electricity in the world. That difference is currently being bridged through alternative power generation by individuals and businesses. In 2008, the Energy Commission of Nigeria estimated that Nigerians spent about $975 million on alternative power supplies. The estimates climbed to $1.9 billion in 2012.

PwC Nigeria, in a 2013report, noted that the world’s top economies generate 1MW of electricity for every one thousand people in the population. Hence, Nigeria with a population of 170 million has an energy need of 170,000MW. The electricity deficit is still a major hindrance to Nigeria achieving its objective of being one of the world’s top 20 economies by 2020.

However, with only 40 percent of the population having access to electricity supply, according to the PwC report, Nigeria presents a huge market for growth In Africa. While the new Tariff would have even made it more appealing to foreign investors, NERC should have enforced the distribution of prepaid meters before approving such.