Years after Nigeria privatised its power sector, Nigerians are yet to reap the benefits of private sector reforms. National electricity output continues to hover below 4,000 megawatts in a country of over 170 million people.
Although investors who acquired power assets on November 1, 2013 did so with some sense of pessimism, promises of a sector devoid of government interference and a level playing ground for investors provided some comfort. However, a myriad of challenges continue to hinder the success of the power reforms. They include inadequate gas supply, poor infrastructure and constant vandalism of power assets.
HIGH COST OF PRODUCTION
Companies across sectors of the economy, particularly manufacturing, continue to suffer under the high cost of production and overheads with billions of naira spent annually on petrol and diesel to power industries and the thousands of small businesses spread across the country. These extra costs are often passed on to consumers but, more importantly, give local producers no fighting chance to compete with the high influx of cheap goods from countries like China. The local manufacturer is often forced to compromise on the quantity and quality of products to stay afloat.
TACKLING THE ISSUES
For the power distribution companies and power generation companies, inadequate power supply and vandalism of power assets remain their biggest problems. The government seems helpless in tackling this issue, constantly condemning incidents of attacks on power assets and describing them as national sabotage.
The authorities however admit that protecting these power assets, some of which run through swampy, remote areas, is a big challenge. There have been promises of the procurement of sophisticated surveillance equipment to solve this problem, but that still remains to be seen.
HIGHER TARIFFS, FREQUENT BLACKOUTS
In February this year, the Nigeria Energy Regulatory Commission, NERC, announced a 45 per cent increase in tariffs and ordered distribution companies to provide meters to customers. This was met with nationwide protests from electricity consumers, labour union groups and the legislature, who described the action as unjustifiable given the little improvements seen in electricity supply.
The electricity regulator insisted that the new tariff regime will help boost investments in the sector and efficiency in the operations of the electricity distribution companies popularly known as DISCOs. However, five months after the tariff increase, a Lagos federal high court on July 13 ordered a reversal to the old tariff regime, stating that the electricity regulator had not followed due process in making the change.
In an interview with CNBC Africa, George Etomi , a Director at the Eko Distribution Company, described the court order as unfortunate. “It’s a setback not just for the industry but for the entire nation,’’ he said. The DISCOs have vowed to appeal the court judgement.
The Nigerian government insists the power reforms haven’t failed and says it will continue to address challenges bedevilling the sector. The power minister Babatunde Fashola says the country is also diversifying its energy mix with investments in solar and hydro, already being made.
For now, the roaring sounds of power generating sets continue across the country. Nigerians can only hope for the day when uninterrupted electricity supply becomes a reality.