The reality is that electricity generation has since been demystified away from this idea of large power grids. Young people everywhere have developed smarter, more clever ways of generating electricity and the future is alternative, smart, sustainable and affordable energy. Now is the time to help ourselves as a people.
Since I gave up paying bills in my house, my poor wife has been picking the bills. Of late I’ve been paying mind to her struggles. I was shocked the first time I found out that we spent N10,000 on electricity every week, even though we still have down time when the estate generating set kicks in. I think back to where we were coming from. I can’t believe we could pay N40,000, plus extra, just to have electricity in a four-bedroom house in which one room is almost always unused. We weren’t running a factory there. I don’t even own gadgets. We hardly use air-conditioning in the mornings and afternoons and only one TV is on most of the time. Yes, we have two refrigerators and one deep freezer. That is the load in a nutshell. We even put off the outside halogen lights just to save cost. Yet we pay over N40,000 on electricity monthly.
In short, electricity has now become too expensive in Nigeria, yet the distribution companies are asking for more money. They want to increase the tariff. The power generating companies (GenCos) are complaining that they are not allowed to recover their costs and also that they cannot produce the volumes that make sense. The power distribution companies (DisCos) are complaining that many people at the grassroots are refusing to pay them and that government also owes them. The GenCos equally complain that the DisCos owe them. The Transmission Company of Nigeria (TCN), is managing broken infrastructure and often begs the GenCos not to generate too much power, else the system shuts down entirely. We have had more than 10 total system collapses this year alone. The consumers complain that the DisCos are not reading their meters and therefore engage in arbitrary billing. The meter manufacturers complain that they are not getting paid for the meters supplied to DisCos. The entire system is broken. We need new thinking.
This is the upshot of our power privatisation. I recall in 2000-2001 when under Governor Gray Davis, the state of California in the United States of America privatised electricity and handed the controls to ENRON. In time ENRON played magic on Californians. Rolling blackouts were initiated in the sweltering summer, just to get people to pay more on their tariffs. Workers of ENRON (energy traders) were later heard on tape mocking people and joking around as they manipulated the energy market, while maximising profit for their company, bonuses for themselves and misery for the people. Governor Davis would later lose his shirt for this. And in came Governor Arnold Schwarzenneger in 2003, whose first duty was to cancel ENRON’s contracts. That was perhaps the world’s first full privatisation gone bad.
…the per capita income in U.S.A or U.K. is about 30 times what obtains in Nigeria. This matters, because what we are seeing with the privatisation of the energy sector in Nigeria is that except something is done to democratise wealth and opportunities, most of Nigeria will soon be in darkness, as the people can no longer cope, and the private companies also give up.
Nigeria also privatised its generation and distribution ends of the electricity chain, leaving only the transmission bit in the hands of government. Many market economists – and their adherents – have been pushing for full privatisation of the transmission of electricity also. It is debatable though if this will solve the problem in that sector. For one, we are paying more already. But it could be worse.
So I went to town to find out what obtains abroad. I found out via google that in 2013, the average electricity bill in the U.S.A was $110.32, according to eyeonhousing.org. From OFGEM – the electricity regulator in the U.K. – I realised that the average ‘dual fuel’ tariff was £94.83 in June 2018. Another website says that for a three to four bedroom house in the U.S.A, you can expect to pay between $150 and $200. Now the N40,000 I pay is about $130 monthly, if we use our official rates. However, the per capita income in U.S.A or U.K. is about 30 times what obtains in Nigeria. This matters, because what we are seeing with the privatisation of the energy sector in Nigeria is that except something is done to democratise wealth and opportunities, most of Nigeria will soon be in darkness, as the people can no longer cope, and the private companies also give up.
Friends who live abroad also responded to my recent facebook post on this matter. I sought to know how much they pay as electricity bills. Olabode said he paid $92 (the equivalent of N28,000) for electricity in an apartment he rented in Texas for five months. Jafaar said he pays an equivalent of N6,250 in Seychelles and the light never blinks. He didn’t say what the size of his apartment is. Moses said his bill in the U.S.A for a five bedroom house is about $137.56 (N42,000 equivalent). Obinna wrote that what I pay in Nigeria here is “ridiculously expensive, even by UK standards.. and the UK experienced a recent hike that caused (an) uproar”. However Akin, who lives in Canada, gave contrary information, that his bill in winter is usually about $380, while for summer, it is about $700 monthly. He didn’t say what kind of mansion he lives in though. Joseph said a “3,000square feet – 3 story house – gas will be about $100 a month in the summer and $300 a month in winter. Electricity would be $100 a month in winter and $250-$300 in summer.” Nelson countered him by saying, “My house is 3,211 square feet with basement in Minnesota (one of the coldest states). I have never paid $250 for gas not even in winter. The highest I paid is $190+. I have never paid more than $150 for electricity. Though we are very strict with the way we consume utilities in our home.”
In general, the cost of producing and distributing energy is higher here than in the U.S.A or elsewhere because we import the entire technology and the importation of other peoples’ ideas and innovations comes at a steep premium. Also those importations and slap up arrangements are extra expensive because of our mindless primitivity and corruption, sabotage…
One Carlo Gambino (not real name) opined that “Nigeria must invest in local power industry as a matter of national security. Asides for the turbine technology which we are light years away from attaining, we need to buy technology licenses and blueprints from OEMs in making consumables and other distribution components from pylons, cables, grid switches, transformers, ceramic components for switches etc., which are constantly replaced time to time. We do not expect to import the millions of kilometers length of cables needed for both the grids and domestic use. So, we must industialise in this sector with (the) best R&D and quality control and aim to be one of African giants in exporting to other African States”. Johnson, in analysing why were are at this point, wrote, “Methinks our major problem is that our cost of building power plant is too high and that is so because we import practically everything necessary. Secondly, the issue of gas insufficiency has increased the cost of production in (the) power sector. The other thing is the double digits interest loans here in Nigeria. Over time we would discover that no power plant can be built without loans and the Nigerian loans here only help to increase capital and production”. Frank wrote: “There is a massive systemic dislocation and disjointment in Nigeria. The current structure is choking progress and increasing regressiveness. That is how simple I can explain it.”
In general, the cost of producing and distributing energy is higher here than in the U.S.A or elsewhere because we import the entire technology and the importation of other peoples’ ideas and innovations comes at a steep premium. Also those importations and slap up arrangements are extra expensive because of our mindless primitivity and corruption, sabotage and general dark-mindedness. What I don’t want the DisCos to get away with is to say our tariff is too cheap. No, it’s not. Let us say what we pay in Nigeria right now is at par with what people pay elsewhere where their incomes are stratospherically higher than ours here, and where most of their payments are taxes that go to government for the provision and maintenance of general infrastructure. Out there, government is king. The big issue though is: for how long can we afford this as a people, given where our income levels are? There is a reason why the DisCos will never get to our rural areas – in spite of the staggered tariffs. It is because the rural guys can never, in this lifetime, pay the rates that these DisCos will want to take from them. The income levels at our rural areas for most families, are tending towards zero. I wrote recently about those Micra taxi drivers in Ibadan, who still collect N20 per drop. Those kinds will never be able to pay their bills.
For the foreseeable future, Nigeria will keep struggling with this broken electricity infrastructure because it is all that we know. But forcing such infrastructure to work may be futile in the medium to long term. I believe we have come to an epoch in which we much think radically differently. I have opined elsewhere that the national grid is to electricity what landlines are to telephony, and that just as we leapt from the age of NITEL’s inefficiency into becoming one of the countries with the highest mobile phone density in the world, we should also begin to extricate ourselves from the national grid by proliferating alternative, stand-alone or embedded energy. It is time for us to lunge into the future. The reality is that electricity generation has since been demystified away from this idea of large power grids. Young people everywhere have developed smarter, more clever ways of generating electricity and the future is alternative, smart, sustainable and affordable energy. Now is the time to help ourselves as a people.
‘Tope Fasua, an Economist, author, blogger and entrepreneur, is presidential candidate of the Abundant Nigeria Renewal Party (ANRP), and can be reached through topsyfash@yahoo.com.
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I read the article and while I agree with some of the statements made, I need to correct some of the incorrect assumptions and statements made in the article. The power situation is complex and the solution is not as easy as most people think. (a) Discos have resulted to estimated billing. what they do is calculate the amount of electricity consumed at the transformer level, divide the electricity consumed by the number of households and bill everyone accordingly. If you live in an area with high level of theft, your estimated billing will be high. This is wrong but it is not entirely the discos fault, the government bears a lot of responsibility for this. (b) I believe the tariff level is still pegged at N199 to $1 which is further incentive for the discos to implement estimated billing. (c) California has always had investor owned power plants. What changed during Governor Davies time was that California decided to allow the market to determine the price of electricity instead of government setting the tariff which is what happens in Nigeria now (government sets tariff). I was living in California then so I witnessed it first hand. (d)A major cause of expensive power plants is not the cost of the technology per say, it is the cost of financing. 90% of the money invested in the power sector comes from outside the country. Therefore the loans have to be repaid in USD and not in Naira. so the fall in the value of the Naira from really hit the power industry hard. That is why they are asking the government to increase tariff. If Nigerian banks were funding the power sector (assuming they had enough money to do this) the tariffs would be 10 times what it is now. (e) another major issue as to why cost of electricity is higher in Nigeria than say the U.S. is cost of loans. Average interest rate in the U.S has been around 2-4%. Utilities have access to one of the lowest rates in the U.S. compared to almost any other business. Nigeria power projects on the other hand have to deal with Nigeria risk. Any business based in Nigeria has to pay premium on interest rate commensurate to the risk of doing business in the country. for Nigeria, this risk is one of the highest in the world. this can add significantly to the cost of power in Nigeria. In addition, the foreign banks will insist you take on loan insurance against the following insecurity from – boko-haram, herds men, policy changes by government, government not keeping its word, corruption etc.) This can be really high. which further adds to the cost of electricity. (f) still another issue is under utilization of capacity. Let me explain using this example. A housing developer is told by government that they need houses for lots of people. Government will give him land in a forest and he will be allowed to build blocks of flats for a lot of people. Government promises to build an expressway to the land so he will get tenants. The developer will get his money back from the rent he charges. The developer then goes out and builds a 2 block of flats with 12 flats in total. unfortunately, the government did not build the road they promised so only 2 families can afford to navigate through the forest to rent the houses. The developer in a desperate bid to find money to pay back the loan decides to charge the 2 tenants for the entire 6 flats so each tenant ends up paying 6 times what the rates are supposed to be. This is a rough analogy of the situation with the generating plants. Imagine that this situation is further worsened if the developer borrowed money in USD when exchange rate was still N160 to $1 and he woke up the next morning and it was N360 to $1 and he is allowed to only collect rent in naira.