After years of poor power supply across the country, the federal government has threatened to revoke the licences of non-performing power Distribution Companies (Discos). The Minister of Power, Adebayo Adelabu, after a meeting with stakeholders in the power sector, expressed government’s concerns about the worsening power supply despite ‘coordinated attempts’ to improve the situation. The minister warned that henceforth, all power Discos would be held accountable, and license revocation would be one of the sanctions to be imposed on non-performing ones. Also, in recent weeks, the minister has exerted pressure on the Generating Companies (GenCos) to enhance their performance.
As part of the measures to improve power supply, the TCN has been instructed to prioritise repair works on damaged transmission towers and other power lines in some states. Additionally, government is poised to settle outstanding debts owed to power generating and gas supply companies to alleviate the financial strain and improve power generating levels nationwide. Clearly, Discos have disappointed Nigerians in the provision of power supply. Undoubtedly, the current state of power generation, transmission and distribution in the country is a reflection of the multiple crises facing the economy. In spite of the installed electricity generation capacity of about 13,000 MW, the actual generation capacity delivered to the national grid for transmission to consumers in the past 8 years has not surpassed an average of 4,000 MW. This is far below the 10,000 MW promised by government.
In recent years, billing had been raised from an average of N23.5 per kilowatt hour (kWh) few years ago to N63 kWh as of January, 2023. This is discouraging and exploitative to consumers and business operators. Therefore, many households are complaining of huge estimated bills for unavailable power supply.
Last year, data from a United Kingdom-based research company, Cable, revealed that over 100 countries offered cheaper electricity than Nigeria. Nigeria is currently ranked 109th of countries with the cheapest electricity tariff in the world, at N56 for one kWh. This is how bad the power sector value chain has broken down in Nigeria. It needs urgent attention.
According to the Manufacturers Association of Nigeria (MAN), many businesses that had exited the country or relocated to neighbouring countries cited power supply challenges as the major reason. Energy cost has worsened business operations since the removal of fuel subsidy. While a litre of petrol is about N800 in some states, the price of diesel has risen to over N1,500 in many others.
Therefore, failure to quickly fix the power sector will hamper industrial development, productivity and investment inflows in the country. Renewable energy is one of options for stable electricity. Statistics showed that between 2013 and early this year, the national grid collapsed 134 times, and 99 times under the immediate past administration.
The economic losses due to grid collapse is estimated at 2 per cent of the nation’s Gross Domestic Product(GDP). The promise made by the Nigerian Electricity Regulatory Commission (NERC) to provide over 4 million prepaid meters to consumers is yet to be fulfilled, even as the price of prepaid meters has been hiked by over 200 per cent due to the depreciation of the naira and scarcity of foreign exchange. According to the 2020 Ease of Doing Business report, 47 per cent of Nigerians lacked access to electricity supply. Many small businesses have identified unreliable electricity as a major challenge to their businesses.
Figures from NERC showed that in the last one year, electricity consumers had been billed N1.12trillion, out of which N750billion was paid as tariffs. According to the World Bank, due to poor power supply in Nigeria, businesses lost in excess of N96.4trillion in the last ten years, at a yearly estimate of $29billion. It remains to be seen how committed the present administration is in revamping the power sector in spite of billions of dollars investment since the sector was unbundled in 2013.
The AfDB had announced a few years ago that it would partner with the federal government on a $410 million transmission project and an additional $200 million through the Rural Electrification Agency (REA) that would make electricity available for the rural areas. Unfortunately, the project was stalled. Sadly, over 80 million Nigerians or 37 per cent of the population have no access to power supply, and many depend on power from generators. In 2020, the World Bank approved Power Sector Recovery Operation loan to ensure the supply of 4,500mw/h of electricity to the national grid. This is in addition to the $550 million loan to the federal government to develop more grids and solar systems. In 2022, the Buhari government said that 10 power transformers and 10 mobile substations would be procured, delivered and installed. It was not done.
While the revocation of licences of non-performing Discos should not be off the table, it should be done with utmost caution to avoid eroding investors’ confidence in the economy. Government should emulate South Africa and Egypt that have overcome their power challenges.