Minister of Power, Works and Housing, Babatunde Raji Fashola

By Concise News editorial board

Going by recent news making rounds, its becoming increasingly clear that Nigerians must brace up for an increase in electricity tariffs in the near future or face the prospect of continuous epileptic power supply.

On the Feb 1st, 2016, the current electricity tariff under the Multi Year Tariff Offer 2015 (MYTO II) took effect. Nigerian Electricity Regulatory Commission (NERC), the governing body, gave several reasons for the 45% increment which took tarriff of most residential areas to between N20.26 – N27.36 kw/h depending on the DISCO serving them.

Between then and now, authorities have continuously stated that in-order to achieve improved power supply, electricity tariffs would have to be increased again at some point. Their cries have, however, been rebuffed by the government and electricity consumers with the National Electricity Regulatory Commission (NERC) being wrongly accused of taking sides with operators in the power sector.

Yes, electricity supply has been very poor. Yes, consumers are angry about non-metering and estimated bills, but if this matter must be judged without sentiments, then we will all arrive at the same conclusion; something has to give in the power sector for Nigerians to enjoy steady power supply.

Our findings reveal that Nigerians will either have to accept an increment in electricity tarriff which the DISCOs and GENCOs hope to use to fund the kind of electricity supply Nigerians want, or have the govt provide a kind of bail-out fund to the GENCOs and DISCOs, or continue to endure the nationwide blackout.

This is the simple truth, and nothing but the truth.

Why electricity tarriff increment is inevitable

Based on our findings, electricity tarriff increment is inevitable for two major reasons; the unfavourable naira/dollar exchange rate and non-credit worthiness of the DISCO’s.

i. Exchange rate: The official exchange rate in the country has risen from N198.97 to over N305.05 to a dollar. The unofficial (black market) exchange rate is about N500 to a USD. This alone is bound to trigger an increase in electricity tariff given the fact that all equipment, spare parts, meters used for the generation, transmission and distribution of electricity in Nigeria are imported.

Secondly, over 80% of the electricity generated in Nigeria is from gas-fired power plant. Gas price happened to be indexed to the US dollars, meaning GENCOs pay gas suppliers in dollars.

Since the govt has refused to accede to NERC’s proposal to price gas in local currency to mitigate the foreign exchange risk, a tariff increment remains the only option for the GENCO’s to be able to recoup its capital tied with the DISCOS.

So, the present exchange rate is enough to trigger an increment in electricity tariff just like it has affected the price of every other product that depends on importation. This was conformed by Dr. Usman Abba Arabi, Head, Public Affairs Department, NERC in a recent press statement.

ii. DISCOs are not credit-worthy and are heavily indebted to GENCOs: The GENCOs have repeatedly claimed that the DISCOs are indebted to them. The DISCOs have in turn blamed non-reflective tariffs, vandalism, low power generation, inability to access credit facilities from the banks and non-payment of bills by customers.

As a result of this indebtedness, GENCOs are even trying to fashion out ways in which they would supply some selected consumers power and collect their money directly from end users.

It is, however, pertinent to ask at this stage, ‘why can’t the DISCOs seek loan facilities from banks to lighten the debt?’

Our findings will shock you. No bank wants to give DISCO’s loan! Why? All the DISCOs lack credibility.

To further buttress this, the deputy managing director of Ibadan Electricity Distribution Company, John Ayodele, told Business Day in 2016, that the balance sheet of the various DISCOs is not sufficient to help them get loans from banks

”If you go to any bank and present the balance sheet of my company, the clerk to the manager would send me out. The situation is that bad,” Ayodele told BusinessDay.

Senate rejects hike in electricity tariff

Recall that the senate, earlier this year, rejected the proposal for tariff hike by NERC. This, as can be deduced from comments from Ben Murray Bruce, Chairman Senate Committee on Power, in defence of senate’s stance on tariff hike, was done apparently in ignorance of the details of NERC’s proposal.

”What I don’t want is for us to leave NEPA as a monopoly and create other monopolies with GENCOs or DISCOs and that is what we have had. Instead of having government monopoly, we now have monopoly in the private sector,” said Senator Ben Bruce.

”For instance, if you want power in Benin, it is not that you have an option. There is only one Disco in Benin, only one Disco in Lagos, only one DISCO in Abuja. You don’t have other DISCOs to compete with, you only have one,” added Sen. Ben Bruce.

This kind of argument put up by Sen. Ben Bruce is far from the realities on ground. Though, this govt’s position enjoys the support of majority of electricity consumers who don’t trust their DISCOs either as a result of the estimated bills being levied on them by DISCOs or what looks like deliberate acts by DISCOs to ensure that end users are not metered, or a combination of both, the fact remains that to put an end to the current nationwide blackout, something has to give. That thing is increasingly looking like the government and electricity consumers’ resistance to tarriff increase.

The earlier that thing gives, the better for Nigeria, its suffering-and-smiling electricity consumers, and it’s struggling economy.