The Electricity Distribution Companies are looking forward to financial support from the government. They are privatised companies and they have been so for some time now. This means that they have refused to grow! Many private firms in Nigeria depend on the public sector to function and they are usually obliged because the Federal Government has so much free money, including borrowed funds that it can dole out to inefficient enterprises. In the wake of the financial crises or global economic crisis of 2007/2008, many developed countries intervened through bailouts to rescue the big businesses from the collapse or bankruptcy but under stringent conditions including time-bound repayment of the bailouts. The intervention worked and the businesses survived, just as the economic crises were short-lived.
Nigeria took queue from the policy. The Federal Government gave out funds as bailouts to rescue a number of private businesses regarded as strategic for employment generation including the textile industry and the transport sector with intention to re-introduce the national airline. The outcome was disastrous as the textile firms remain shut, the national airline never materialised, and some banks took the money as normal largesse. They have up till now failed to account for the funds and no questions are being raised. The Asset Management Company of Nigeria that was established to bail out some of the businesses from bankruptcy is itself presently on the verge of bankruptcy. There were unconfirmed reports at that time that one of the beneficiaries of the bailouts used the money to establish a power company in a neighbouring country! There was no investigation on why the intervention failed to deliver. The probe is now on to unravel what happened many years thereafter. Hitherto, the country was moving on as if nothing happened because the rent being collected from the oil sector continued to flow in in multiples.
The owners of the electricity distribution companies, also known as DISCOs, have enjoyed interventions from government before. Of course, some of them have moved forward but a majority has not or is pretending so in order to have a free ride to government benevolence. Truly, some of them have not performed and cannot because they are not running the businesses like private enterprises that should think outside the box. They have used a number of unorthodox means to arm-twist consumers to pay for services not rendered and for property that is owned by these companies.
Understandably, many consumers are using electricity without paying for it. But the companies are to blame. Those Nigerians do not have meters but connect illegally. It is possible that a large proportion of such customers would have loved to own meters but cannot afford such, more so when they realise they have an alternative in free ride. The DISCOs should conduct research to investigate, among others, how much was and is being realised from areas with large supply of meters during the first set of free meters and areas sparsely supplied. The result is predictable in favour of the former group. What this implies is that the DISCOs should supply the meters free and seek enforcement that all buildings must obtain the meters to avoid prosecution. After all, the meters remain the property of the DISCOs. Since meters are available in every house, there would no need for anyone to move the one in their house during relocation. However, the meter could be connected at affordable service fee. The more the area of coverage of meters, the greater the amount of revenue that will be generated per month. However, in order to make the supply and use of the meter profitable, particularly in densely populated areas, the meters must be installed in the Nigerian way, mounted on the pole but with caution for weather effects and proper monitoring with respect to tampering with them and connecting wires.
Going back to the issue of financial intervention by the Federal Government for the revival of businesses, it is arguably unnecessary. The essence of the capital market is to supply capital for business expansion. So, the DISCOs should patronise the capital market and sell shares to potential investors. There is no need to hold on to business as personal entities when it is possible to raise funds from the public. Everybody knows that Dangote Cement belongs to shareholders though Aliko Dangote is the highest shareholder. Instead of looking for funds from the government, he went to the market to mobilise funds to expand his business which has since been growing in leaps and bound.
Even the Federal Government goes to borrow funds in the capital market. Most domestic bonds, Treasury bills and other financial instruments that the Debt Management Office issues regularly are loans for government. If government is buoyant as it pretends to be by literarily dashing out money, there would not be any need for the domestic and foreign loans choking the economy and threatening Nigeria’s development. It is even not impossible that the intervention funds that the government borrows and doles out are returned to the market by beneficiaries to purchase bonds and Treasury bills in a kind of round-tripping manner. If they invested earlier intervention funds properly, there would not be any need for seeking funds again and within a short span of 10 years.
Each time the Federal Government sells Treasury bills and raises funds, the report is over-subscription. This implies there is enough money in the economy for borrowers. It is therefore imperative that our industries should patronise the capital market for funds. The problem is that many entrepreneurs in Nigeria prefer sole ownership of business than spread the ownership to expand their businesses. Economically, the bigger a business is, the greater the internal and external economies of scale or benefits that accrue to such business. Large volume of output because of appropriate and adequate funding will result in lower unit price and invariably bigger sales. Eventually, the corresponding huge profit will be greater than if the business is solely owned with small output, small sales and meagre profit.
Recently, the House of Representatives passed a motion in support of government intervention in private and public sector businesses. It is a wrong step to take at this time that even the Federal Government is in debt and the private sector ought to come to its rescue in terms of employment generation. Presently, a majority of the so-called private sector businesses are public sector-dependent and thus exist as parasites. They have to be forced to wean themselves from the feeding bottle of government. They should be truly private and promote dynamic, independent, innovative and ambitious leading sector. Patronising the capital market has the advantage of developing the activities of the market, serves to attract international patronage and generally deepening the financial system as a whole which are highly beneficial to the private sector businesses and the economy.
The professional bodies like the Nigerian Economic Society, the Chartered Institute of Bankers of Nigeria, the Institute of Chartered Accountant of Nigeria, the Chambers of Commerce and Industries and even the labour unions, civil society organisations and student bodies should rise up to support the call for promoting business expansion through the capital market patronage rather than compete for government borrowed funds in a round-tripping manner. It is possible that government might need to intervene with financial support in time of serious economic crisis, particularly those externally induced but the current situation does not require such an intervention. My recent involvement in industrial production has shown that high cost of production in business is caused by two major factors namely, cost of energy involving purchase and maintenance of generators with fuel and spare parts, and, maintenance of vehicles as a result of bad roads. Therefore, what is needed for government to spend money on are transport infrastructure such as roads and rail lines, and, energy infrastructure such as funding power generation through gas, solar, coal, wind and domestic-use nuclear energy. Intervening in these areas will naturally assist industrial growth, employment generation and poverty reduction.
Tella is a Professor of Economics, Olabisi Onabanjo University, Ago Iwoye
END
Be the first to comment