Thirteen years after the power sector was offered, most Nigerians still plan their day round NEPA.
The generator is still the actual utility.
The diesel invoice is still the actual tariff.
At the Lagos Country Club Business Forum 3.0, Prof Barth Nnaji, founding father of Geometric Power and a former Minister of Power, defined why.
As reported by ThisDay, he listed infrastructure deficits, income assortment losses, liquidity crises and bottlenecks throughout the worth chain.
But he put one motive above the remaining. Government promised buyers cost-reflective tariffs, then refused to permit them.
That is the entire story in a single sentence. Everything else follows from it.
A promise made, a promise damaged
Before June 2012, the tariff was about N6 per kWh. The plan was a levelised, cost-reflective tariff. Some buyer classes moved to about N22. The city poor and rural prospects have been protected, and a few even dropped from N6 to N4.
Investors purchased the DisCos and GenCos on that promise. Then the tariff froze in politics. Nnaji says even right now’s new tariffs are still not absolutely cost-reflective.
Think about what meaning for a enterprise. You purchase a store. You are advised you’ll be able to promote bread on the value it prices to bake. Then the federal government says promote beneath price. You can’t repair the oven. You can’t rent. You can’t pay the flour provider. That is a DisCo in Nigeria.
Someone at all times pays
Here is the half many individuals miss. Power is rarely free. If the client doesn’t pay the associated fee, any individual else does.
Nnaji did the sums. A subsidy of N50 per kWh on 5,000 MW involves about N180 billion a month. That is about N2.16 trillion a 12 months. And GenCos are owed greater than N7 trillion.
So the actual query isn’t whether or not Nigeria can afford cost-reflective power. The query is who pays the invoice: the consumer by the tariff, the taxpayer by the price range, or the GenCo by debt that by no means will get settled. Right now we pay all three, plus diesel.
13,000 MW on paper, 5,000 MW within the wire
Nigeria has put in capability of about 13,000 MW. Only about 5,000 MW reaches the grid. In different phrases, greater than half of what has been constructed sits idle whereas properties and factories run generators.
Why not construct extra? Because it’s costly and paid in {dollars}. Nnaji places plant price at greater than $1.5 million per MW, and many of the tools is imported. Every new megawatt is a requirement for FX. A plant that sells power in naira at beneath price, whereas it owes for generators in {dollars}, is a plant no banker desires to fund.
Metering is identical story. Aba Power spent about N50 billion on good meters, overlaying greater than 96 per cent of its prospects. That is what it prices to know who used what and to invoice them correctly. Most DisCos by no means had that capital, as a result of the tariff by no means produced it.
The backstop that disappeared
There is a quieter drawback. In 2015, the partial threat backstop referred to as the PRG was suspended. The PRG gave lenders consolation that if authorities didn’t pay for power, there was cowl.
Without it, virtually no new grid crops have are available in for about 11 years. Azure Power in Edo was one which had a PRG. The Aba undertaking was an exception. ExxonMobil’s 500 MW plant and Century Power’s 500 MW plant have been suspended with out it.
That is 1,000 MW of capability that by no means occurred. Investors usually are not refusing Nigeria. They are refusing to hold a political threat that authorities won’t share.
So, can Nigeria afford power?
Nigeria already pays for power. It pays badly. It pays by subsidies that crowd out roads and hospitals. It pays by GenCo debt that scares off the following investor. It pays by generators in each compound, in each store and on each road.
A price-reflective tariff isn’t merciless by default. It can defend the poor, because the 2012 plan tried to do, with decrease bands for rural and low-income customers. What it can’t do is faux electrical energy prices N6 when it prices way more.
What it means for you
If you run a enterprise, add diesel, generator servicing and misplaced hours. Compare that with a broadcast tariff on a dependable band. For many small corporations, paid grid power that truly comes beats “cheap” power that doesn’t.
If you’re pricing a brand new manufacturing facility or store, price range in your personal power from day one till the tariff and debt questions are settled.
If you’re a saver or investor, watch the coverage, not the headlines. Cost-reflective tariffs, GenCo debt settlement and threat cowl for lenders would sign that capital can circulate into power once more. Until then, deal with guarantees of latest megawatts with warning.
If you’re a family, learn your invoice and your band. Ask your DisCo for a meter. Estimated billing is a part of the identical damaged chain.
In closing
Prof Nnaji’s level is straightforward. You can’t promise buyers one value, implement one other, and count on gentle. Nigeria can afford power. What it can’t afford is to maintain pretending power is reasonable.
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