Abuja Disco: Electricity Tariff Should be N65 Per Kilowatt Hour

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ChinemeOkafor in Abuja

The Abuja Electricity Distribution Company (AEDC) has said that the average true cost of distributing electricity to customers within its network should be N65 per kilowatts hour (kWh) as against the N35/kWh it currently charges.

It also said the financial illiquidity currently troubling Nigeria’s electricity market has been made worse by the inter-bank interest rates charged by ‘reference banks’ in the country for lending to power utilities, and as such, should be considered for changes.

AEDC specifically said it wanted the Nigerian Inter-bank Offered Rate (NIBOR) plus 10 per cent removed from the system. It said between February 2015 and March 2017, it got an interest charge of about N16 billion through the NIBOR.
NIBOR represents the short-term lending rates of selected banks in the Nigerian inter-bank market, and is quoted as annualised rates.

Accordingly, NIBOR is a ‘polled’ rate, meaning that a set of selected banks known as ‘reference banks’ submit quotes which are processed to give NIBOR.
However, AEDC’s Managing Director, Mr. Ernest Mupwaya said at a recent capacity building workshop for journalists in Abuja, that the practice should be discontinued because it was contributing to the sector’s financial troubles.

“NIBOR +10 per cent being charged should be removed, it is exacerbating the liquidity issue. Total interest charged to AEDC from February 2015 to March 2017 is estimated at N16 billion,” said Mupwaya in a presentation he made at the workshop.
He further explained on the current tariff used by the Discos to distribute electricity to its customers in Abuja, Nasarawa, Kogi and Niger states, that it was N30 short of being cost efficient based on what he noted should be the current tariff as reviewed by the Nigerian Electricity Regulatory Commission (NERC) but not approved for implementation.
According to him, government should be able to convert the tariff shortfall to a regulatory asset instrument which could be traded by the Discos.

“If current tariffs are N35/kWh, with tariff review of N30/kWh imminent for cost reflectivity but N65kWh would not be affordable to customers and government is unwilling to pass on this to customers, then N30/kWh can be converted to regulatory asset instrument. The government then acknowledges the obligation for the N30/kWh and issues a note to Discos to this effect. The note being issued by the government implicitly comes with government guarantee which makes it tradeable. The regulatory asset instrument would be issued by government and redeemable at a coupon rate over a given period,” Mupwaya explained.

  • FrNinja

    It costs 67 naira per kwh to generate power for oneself using diesel so AEDC not being honest. Besides It is buying power at 18 naira per kwh and cannot make money at 35 naira per kwh?

    • femi

      Discos are buying power at 13 cents which is N40 naira

      • FrNinja

        According to who?

        • femi

          NBET who sells them the power and invoice them

          • FrNinja

            Dont know where you are getting your info from. Transcorp power sold at around 15,000 per mwh or 15 per kwh according to their annual report. According to a disco they buy at 19 per kwh inclusive of various charges.

          • William Norris

            According to a disco they buy at 19 per kwh inclusive of various charges and sell at between 22-30 naira per kwh or 11-50% more. They get paid in advance by customers and yet cant make money. You know why? They dont have the funds to meter customers. There are over 4 million unmetered customers which would cost over 140 billion to meter.
            ——————————————-
            The reason they can’t buy meters is because they’re not making enough money.

            If the government allows the Discos to charge whatever they want, the rich customers will end up paying a lot, which can be used to buy meters and other infrastructure and also have profit.

            With time the Disco will try and expand their customer base and the logical way to do it would be to lower prices…and their FIXED COSTS would already be paid by the richer customers.

            That’s actually what MTN did but Nigerians are too desperate for cheap and free services they hope can be paid for with Niger Delta petro-dollars. Nothing else explains the obtuse insistence on “cheap” electricity.

          • FrNinja

            MTN borrowed 1 billion dollars between 2002 and 2004 to fund its network rollout in Nigeria. It was not profitable until 2006. It borrowed a further 2 billion dollars to roll out 3G services in 2007. It never relied on tariffs to fund expansion.

            Electricity distribution would be successful if companies that won licenses had the wherewithal to expand their networks. The metering gap is well over 200 billion talk less the need for more transformers, substations etc. Distribution needs at least investment of anywhere between 100,000 – 300,000 per customer. There should be at least 12-15 million customers suggesting that distribution needs a minimum of 1.2 trillion or over 100 billion per DISCO. NONE of the DISCOs had access to this finance.

          • William Norris

            I shouldn’t have to spell out everything. Companies raise money for their operations by 3 means

            (1.) Internal or organic, from their own pocket or profits. (2)Investors who buy shares in the company (3). Lenders.

            (2) and (3) only happen of there is CONFIDENCE of a future profit.

            If indeed MTN borrowed $1 billion for their operation, they were only able to get such money because the LENDERS were confident that MTN would make a profit.

            The LENDERS had such confidence because MTN could charge whatever tariffs or prices it liked. Such lenders or investors typically undertake DUE DILIGENCE to ensure they will get a RETURN on their money.

            I think what I’ve written above is very clear. I shouldn’t have to go further but here goes.

            Would YOU lend money to MTN if THE LAW had forced them to charge low prices or prices lower than they want?

            As a practical matter, would you lend to Abuja Disco given the LEGAL scenario of mandated low prices? If they sold stock today would you buy it?

            I asked earlier if you would invest in Forte or Transcorp. Their major customers are these Discos.

            Under which conditions would you invest in those companies?

            1. Under current legal prices.

            2. If the government made new laws allowing Discos to charge whatever they want?

            Any answer?

          • FrNinja

            I once held MTN stock and it was one of the best investment I ever made returning 3x on the back of risky markets like Nigeria. MTN succeeded because they had giant pockets of capital and saw unmet demand. They invested 1 billion dollars at a time when the entire telecoms market in Nigeria was less than a quarter of that in revenue.

            For the Nigerian electricity market tariffs are not the main problem. Ensuring that customers pay fully for electricity is the issue. 70% of electricity is not paid for either through meter bypass, unmetered connections and fraud. No business can survive with a 70% loss of revenue except perhaps govt.

            So for the sector to succeed the govt will need to sell distribution and transmission to companies that have a 20 year investment horizon and the deep pockets to ensure that customers pay for what they use.

            Technology is such that with smart meters and GIS, companies should be able to quickly identify and limit theft. But where none of the DISCOs have the capacity to meter fully then the sector will just bleed back into the hands of government.

          • William Norris

            Well if you invested in MTN then you should know what I’m on about. Your investment worked in part because government didn’t regulate tariffs. I remember there was a time when Nigerians were demanding REGULATION of MTN tariffs and a bill was introduced in the National Assembly to do so.

            MTN had deep pockets and yet it started with selling simcards for 50,000!!! Nigerians paid and got phoone service. Today a SIM card is 200 or less.

            Price regulation never works. It ALWAYS promotes scarcity. I’ve given several real life examples from Nigeria. Here’s another one. Do you know that the government also regulates the price of gas….and that the price is BELOW what the electricity generating companies are willing to pay? That low price is a major reason why there’s scarcity of gas despite Nigeria having oceans of the stuff that is BURNED by flaring. It’s cheaper to burn the gas than sell it at the official price!

            I don’t know why it’s so difficult for you and Nigerians in general to accept this truth.

            Abuja Disco is demanding 65. I’m sure their pricing model allows for theft and purchasing the best technology. Afterall MTN paid or still pays for generators and security guards at their masts. It’s a cost of business. It can be handled.

            If Nigerians want grid electricity they either pay up or continue using other available options. It’s not by force, if they want they can take the companies back and let government run them let’s see how they will do. I mean their mighty Federal Government has very DEEP POCKETS and the price of CRUDE oil is at $60 so there is plenty money to buy the meters and do all those needed investments.

            This is a very simple matter. Abuja Disco has named their price. Pay or use gen or solar. It’s a free world. I don’t know what else to tell you.

          • FrNinja

            Electricity prices are regulated in the UK, France, Germany, Italy, Sweden and many countries to prevent monopoly abuse. Yet they do not suffer from scarcity. And by the way this spans from the privatized UK market to the state run French model to the German model pushing renewable energy.

            Nigeria needs to realize that electricity is a massive investment and its not for briefcase businessmen or primitive governments.

            You need to spend money to make money. The govt of Egypt spends roughly 1 billion dollars a year expanding power. They have 6 times the capacity of Nigeria. Nigeria feels buying cars for the senate or paying all those idle legislooters 100 billion a year is more priority than power.

            Again the sooner Nigeria finds new investors on the distribution side the better it undoes all the damage of Goodluck and Sambos corrupt privatization exercise.

            They need to take back all insolvent DISCOS break them up into smaller pieces along state lines and auction them off.

            A DISCO of 100,000 electricity customers is more manageable for the small investors you have in Nigeria. Its capex requirements would be on the order of 30 billion.

          • William Norris

            There’s corruption everywhere. In the USA many electricity companies have colluded with colluded with State governments to enact laws that impede the adoption of solar and wind power and therefore consumer choice. So corruption while it’s not a good thing is NOT decisive in these matters.

            Nigerians just don’t want to pay full price for electricity. Just like they don’t want to pay full price for fuel, university education. They don’t want to pay taxes either. They just want government to keep KILLING & PILLAGING the people of the Niger Delta and distribute the petro-dollars fairly and pay for everything.

            I’ve heard you. I’m on the side of Nigerians. Electricity should be free. Government that doesn’t ensure free electricity is corrupt. Thank you.

          • FrNinja

            Hope you have seen this article: http://www.thisdaylive.com/index.php/2017/11/17/fg-comes-up-with-action-plan-for-takeover-of-distressed-discos/

            Note that the md of bulk trader said the DISCOs buy power at 18 naira per kwh and sell on average at 31.

          • William Norris

            So what? The NBET and TCN are owned or controlled by government and they’re parroting the populist chant of Fashola. Here is Fashola telling the truth…if you’re so interested in this issue you will read the entire thing.

            ————————————
            Excerpt from interview given by Fashola on Apr 24 2016.

            Read more at: https://www.vanguardngr.com/2016/04/price-nigerians-must-pay-fashola/

            In order to validate what they were telling me I called a meeting of all the DisCos and the DisCos took me through all the challenges that they were facing. It wasn’t that they were without blame, but these were the realities and if we kept the tariff going like that, every two years, Nigeria would be indebted to them to over a trillion Naira for an asset we had sold. So we were going back to an era of subsidy for people who are supposed to be operating commercially. I couldn’t recommend that. If we had a trillion Naira to spend on Power why didn’t we give it to PHCN. If we had done that we won’t be where we are today. So this was what changed my thinking, because without a doubt as I have always told people there is problem with gas. Gas production for local use was low because the price was not right. Local gas use was selling at $1.30 and for export it was $4. If you were producing gas where would you sell it? So we needed to raise that price to get more gas to our idle power plants. So by the time I became Minster that decision had been made to add two dollars to the price of Gas to take the price of Gas to $2.50 and to allow for 80 Cents transportation which came to $3.30 from $1.30. If gas was the major material for producing power, how sensible is it to expect that the major component, the palm oil that you would use for cooking your soup, the price would go up and the price of your stew would not go up. So that was the basis when l surrendered my objection to tariff review. As l said, l have no authority but l have an opinion and l saw that this tariff, as challenging as it might be, was really the driver for gas. It has become the incentive to supply gas; if we get more gas, we will get more power. How did we reach 5,000 MW? We haven’t built any new plants, we just got more gas into the existing power plants and the more gas that comes, the more power we’ll get. We still have power plants in Geregu that has six turbines, only two are working; four are idle. Each one of them has 115 MW of power to produce, so that’s 460 MW of power idle. Omotosho is running at half speed, Olorunsogo is running at half speed, the old Lagos IPP built by Governor Tinubu now managed by AES is lying fallow in Lagos, 240 MW, no gas. So if the price of gas is not right, you won’t fire those plants. It’s that simple. That was why, it made sense to me to support it but the decider was NERC, not me. With the increase in tariff will Nigerians now have stable Power? There is still a lot of work to do. What I can tell you is that if we can get the cases out of court against the tariff, we get the cases out of Parliament against the tariff, because I believe that business men like to deal with their regulator not with politicians, they understand business rules they don’t understand political rules, then you create stability in the market. Business men are confident; they know that the game won’t change. They will take position and in that way, you will see first incremental power. If you don’t have incremental power, moving from 5,000 to 8,000 and upwards like that you can’t equitably distribute what is not enough. The logic behind it is like ten people are thirsty and there is one bottle of Ragolis water and they ask the seller to buy more Ragolis water when the cost of production has increased and they are not ready to pay for the difference, they won’t get enough Ragolis water to quench their thirst.

            Read more at: https://www.vanguardngr.com/2016/04/price-nigerians-must-pay-fashola/
            ———————————————

            The DISCOs have named the price they want to charge. What’s all the rigmarole about?

            Did you read and understand what he was saying about gas? The same gas that sells at $4 on the international market has LEGALLY REGULATED DOMESTIC price of $1.30 in Nigeria. NOBODY will willingly invest in the infrastructure needed for gas production at that price.

            This is NOT in the interview but do you know that it was Barth Nnaji as Minister who increased the regulated price of gas from $0.10 to the present price? Yes, Nigeria has set the price of gas at TEN CENTS and back then the international price was $7. That increase in price by Barth Nnaji is one of the MAIN REASONS Nigeria can even produce 3,000 or 5,000 MW today. The electricity is not being DISTRIBUTED because the government has set the price of electricity TOO LOW. Simple !!!

            Buy electricity at 18 sell at 31, profit of 13. Does that sound correct to you? NOW PLEASE….PLEASE….think about this…Is buying electricity the ONLY cost involved in running a DISCO? Fashola himself admits here that the distribution companies only retain a small fraction of the tariffs they collect.

            READ THE ENTIRE COMPLETE INTERVIEW…so you can understand what the issues are. Fashola says there are COURT INJUNCTIONS and political pressures to keep electricity prices low.

            MTN has deep pockets. Yet it charged 50,000 for simcard when it initiated service. Today you can get the same thing for 200.

            Dangote used to charge much higher prices for cement. Years later prices are down. Why?

            WHY can’t the same thing happen in electricity?

            WHY ARE NIGERIANS SO DESPERATE FOR FREE STUFF?

            I remember when it was said that any increase in petrol price would kill Nigerians. Yet Buhari has almost DOUBLED prices and still paying subsidy and Nigerians are buying.

            Once again, I say give Nigerians what they want. FREE FREE FREE ELECTRICITY for all!

          • FrNinja

            In your free market fantasy you believe that giving DISCOs higher electricity prices will solve the primary failure of Goodlucks privatization which was finding financially capable investors.

            We know that currently all the DISCOS combined consume around 2,500 GWh per month or SHOULD get a revenue of 32 billion naira net of power purchase and transmission costs (2500 x 13,000,000 naira). Now they combined have around 15 billion in staff costs. So best case they make around 17 billion per month. They have to pay off debt of well over 200 billion so lets say monthly interest rates eat up around 2 billion per month. That gives them 15 billion for capex in best case scenario. They SHOULD have had well over 400 billion over the last 3 years to dedicate to meters, transformers, etc.

            So why has are DISCOs instead barely metering, barely fixing their infrastructure and owing the Bulk trader billions?

            Truth is that while the DISCOs bill 2,500 GWh, they recover less than half of that. So rather than receiving 32 billion (net of power purchase+TCN) they only collect 15 billion. So now they are in red territory unable to fully cover salaries and interest on debt.

            But instead of addressing revenue leakages they have consistently developed the habit of asking govt for a bailout in higher tariffs over the years. We have gone from 12 naira a kwh four years ago to over 31 naira a kwh today and little has changed.

            So the problem comes back to the core of who the DISCOs are. Many are financially incapable entities who should not be in the business of electricity distribution. Metering requires well over 200 billion which they don’t have. Reducing technical losses requires billions of transformers, substations which they also do not have. Furthermore they are owing the bulk trader over 300 billion in unpaid electricity invoices.

            So why continue to babysit them as Fashola in his latest brainwave suggests with the idea that customers should be responsible for buying meters? Is this not a regression to the days of PHCN where customers were responsible for meters, poles and other infrastructure. What next? Customers should buy transformers too?

            Truth is that the govt has to admit that the sector has failed and quickly recover it. The AMCON balance sheet will swell further, the crony associates of Goodluck will walk away with loads of free cash and Nigerian government will be back to square one. But sometimes its better getting it right from the start than the disasterous experiment of the last 5 years.

            So govt should recover it and think of new ways to restructure the distribution sector. There are several solutions:

            1) Break all failed DISCOs into smaller pieces of one or two per state and privatize.

            2) merge all failed DISCOs into one and privatize again.

            3) Hand over failed DISCOs to a management company to run.

            4) re-privatize failed DISCOs but create a new retailer licensing class responsible for buying electricity from DISCOs metering and collecting from customers.

          • FrNinja

            We know that currently all the DISCOS combined consume around 2,500 GWh per month or SHOULD get a revenue of 32 billion naira net of power purchase and transmission costs (2500 x 13,000,000 naira). Now they combined have around 15 billion in staff costs. So best case they make around 17 billion per month. They have to pay off debt of well over 200 billion so lets say monthly interest rates eat up around 2 billion per month. That gives them 15 billion for capex in best case scenario. They SHOULD have had well over 400 billion over the last 3 years to dedicate to meters, transformers, etc.
            So why has are DISCOs instead barely metering, barely fixing their infrastructure and owing the Bulk trader billions?

          • FrNinja

            The tuth is that while the DISCOs bill 2,500 GWh, they recover less than half of that. So rather than receiving 32 billion (net of power purchase+TCN) they only collect 15 billion. So now they are in red territory unable to fully cover salaries and interest on debt.
            But instead of addressing revenue leakages they have consistently developed the habit of asking govt for a bailout in higher tariffs over the years. We have gone from 12 naira a kwh four years ago to over 31 naira a kwh today and little has changed.

          • FrNinja

            The problem comes back to the core of who the DISCOs are. Many are financially incapable entities who should not be in the business of electricity distribution. Metering requires well over 200 billion which they don’t have. Reducing technical losses requires billions of transformers, substations which they also do not have. Furthermore they are owing the bulk trader over 300 billion in unpaid electricity invoices.

            So why continue to babysit them as Fashola in his latest brainwave suggests with the idea that customers should be responsible for buying meters? Is this not a regression to the days of PHCN where customers were responsible for meters, poles and other infrastructure. What next? Customers should buy transformers too?

          • William Norris

            You go on and on about deep pockets.

            MTN has deep pockets.

            WHY did MTN charge 50,000 naira per simcard when they started their network?

            The same MTN charges less than 200 naira today so it’s clear they were charging VERY HIGH PRICES.

            You need to explore that mystery as you call for deep pocket investors in the electricity market. So please explain.

          • FrNinja

            You STILL have not refuted my point. The point being that MTN spent billions rolling out its network well ahead of customer acquisition and revenue.

            This is what one expects of any successful private investor in infrastructure – spend big short term and recover long term. As it is MTN reaped dividends over the years making between $1-2 billion in profits every year since 2007 from their Nigerian operation.

            Now had the Nigerian government gotten the right investors in distribution, you would have seen the same thing. By now they would have metered EVERYBODY since it is critical to their revenue. They would have stamped out electricity theft or made it minimal (the same way MTN and other telcos police their base stations and limit billing fraud). You would have heard announcements about various major private equity funds investing in Nigerian electricity distribution and not just power generating companies.

            But all this did not happen because the critical issue was not the tariff but the capitalization of the distribution companies. They lack the resources to control distribution.

          • William Norris

            Your point is refuted by this, I ve said it multiple times –

            MTN WOULD NEVER INVEST in the first place IF TARIFFS WERE REGULATED!

            MTN invested in Nigeria because it saw a FREE MARKET in telecom services. Why is this difficult to grasp?

            I clearly remember when the National Assembly introduced a bill to regulate tariffs. If that bill had passed that would have been the END of the communication revolution in Nigeria.

            DSTV and satellite TV rates in general are NOT regulated either. Do it and you can kiss the industry goodbye.

            Exxon Mobil has SOLD OUT of their retail business in Nigeria because of regulated fuel prices.

            Admission slots to Federal Universities are scarce…because FEES ARE REGULATED to a legal maximum of 40,000 per year. If ever such a few cap is imposed on PRIVATE UNIVERSITIES, many of them wow shut down and the result would be SCARCITY just like in Federal Universities. Helllooooooo!

            SO YOUR POINT IS REFUTED. No serious business will invest where their prices are CONTROLLED by government. EVEN YOU WOULD NOT DO IT, you made mokney o nvesto my in MTN but you want electricity companies to provide their own service for free and stiff their shareholders? Give it a rest Sir!

          • William Norris

            Even if the DISCOS had $1 trillion dollars, they will not invest into a market where government suppresses prices in response to court cases and popular pressure as enumerated by Fashola.

            Investment responds to the possibility of profit over and above other ALTERNATIVE investments.

            Right now Treasury Bills are paying over 15%….much less risk than investing in the electricity market.

            Anyway CRUDE OIL is trading above $60, that’s enough money to buy back and take over the entire sector and give every Nigerian free electricity. Good Luck with that.

          • FrNinja

            Try again. EDF, Eskom, Centrica, Iberdrola all make healthy profits in markets where prices are highly regulated. Their margins are less than 10% unlike the DISCOs who have a 72% starting margin.

          • William Norris

            You must not have read the Vanguard interview I provided. Oh well.

            I only recognize Eskom of South Africa in that list of power companies.

            I’ve often written that publicly owned enterprises can thrive in cohesive nations. Eskom started as a government owned utility in a nation dominated by the Boers.

            Human nature will NEVER CHANGE.

            As for your claims on margins, we heard the same claims about MTN and Dangote. Given the operating environment the DISCOS may need a 300% margin.

            They have named their price. The choices for Nigerians are clear.

            1. Pay market prices.

            2. Continue with what you have now

            3. Take back the electricity sector and make it public again.

            No amount of studies, subsidies reorganization, reengineering will change anything.

            CRUDE OIL is trading at $60. There’s plenty of money to play with. Good Luck!

          • FrNinja

            Eskom is owned by the SA govt. Less than 5% of South Africans are Boer. EDF is majority owned by the French govt, Iberdrola a spanish utility is owned majority by the Qatar govt. My point was that all these companies are heavily capitalized. They can make money with 10% margins.

            Perhaps if Nigerian govt was as disciplined they would not have made a mess of power. The Egyptian govt today generates, transmits and distributes 33,000MW. Nigeria is dancing with 4,000MW.

            For Nigeria to deliver on power reselling distribution to deep pocketed investors is the way to go not to cronies. They either break up each failed disco into smaller ones and resell or they look for a large investor with lots of cash.

            I would say they should go small with discos. A disco of 50,000 customers is far easier to meter and bill than one of 800,000. Urban areas would be the winner as it should be since customers are in smaller easier to monitor and reach places.

            It would probably leave the govt with a portfolio of unsold discos in rural areas but they could tackle these easier by pushing renewables as lumos is doing.

          • William Norris

            Eskom was ESTABLISHED at a time when the Boers were dominant. It hasn’t been performing well in these more….egalitarian times.

            All the other countries you mentioned are far more COHESIVE than Nigeria so government enterprises might work better for them.

            The MAJOR PROBLEM with the electricity sector in Nigeria is PRICING……not size. Pay up or continue as is.

            Or hey, let Fashola take over the electricity sector. Bring back NEPA or PHCN. Crude Oil prices are back above $60, there’s plenty of money to give Nigerians free electricity.

    • William Norris

      If you believe that the electricity companies are profitable at current pricing, PROVE IT by investing some of YOUR money in the electricity companies that are trading on the Nigeria Stock Exchange. It doesn’t take much, you can invest as little as ₦5,000 or maybe ₦ 1million or a billion. Go and look at the SHARE PRICES of the companies in that sector and tell me if they LOOK PROFITABLE.

      ₦65 is still cheaper than ₦67.

      By the way, when you’re calculating the cost of using a personal diesel generator, do you also include pollution, noise, logistics of procuring diesel, risk of fire and other accidents? How about maintenance and repair of your diesel gen or even solar inverter system if you have one?

      The government should simply allow ALL electricity companies to charge whatever they want. Those that can’t or don’t want to pay can make a CHOICE and stick with their diesel gens or install a solar panel or burn firewood. That’s what free markets are about.

      Even if the DISCO is making profit at ₦35, it’s natural that they want to make MORE in order to pay their INVESTORS. Nobody invests money to make low returns.

      YOU Your implied accusation of GREED is the same one levelled at MTN and Dangote when the telecom and cement industries were deregulated. It’s an unfounded fear based a profound misunderanding of ECONOMIC REALITY.

      Price regulation is ALWAYS a major cause of SCARCITY.

      Price regulation can only be sustained by massive SUBSIDIES which lead to CORRUPTION.

      • FrNinja

        First of all, there are no electricity companies traded on the Nigerian Stock Exchange. Secondly, there is no competition in the electricity distribution sector unlike in Mobile telephony. One cannot switch from Abuja DISCO whereas one can jump from MTN to Airtel or to Glo or in the case of Dangote decide to buy Lafarge or Bua Cement. So allowing unregulated pricing by electricity distributors will result in monopoly pricing.

        The fact is that the mess in the Nigerian electricity privatization process is due to the fact that it was badly managed by the Goodluck administration. They sold distribution companies to investors that lacked the financial capital to make the sector a success. Today DISCOs are in the business of inflating their bills to unmetered customers while not paying their bills with the power generating companies.

        The so-called investors crying that the tariff is not “cost-reflective” are scam artists generating revenue, not paying the bulk trader in full and walking away with profits leaving the Nigerian government stuck with a tab of over 800 billion in unpaid electricity along with loans made by the banking sector. They know ultimately that the government will be forced to take back the DISCOs. So in the meanwhile the game is pull out as much money as you can. What a disaster!

        The Nigerian government is going to record a loss of at least well over 2 trillion in its 5 year adventure with electricity “privatization”.

        • William Norris

          Forte and Transcorp are in the electricity business and they trade on the exchange. Go and check.

          There is plenty of competition. YOUR DIESEL GEN is a competitor to the electricity companies.

          Solar provides some competition.

          Firewood too.

          Even darkness is a choice.

          Your claim that the industry is a scam was levelled at MTN and Dangote too. Initially both companies charged very high prices which have decreased over time.

          Is Transcorp a scam? GE is a Fortune 500 company that is involved in the electricity market, I think they know a scam when they see one.

          The problem in the sector…and the while country….is the NIGERIAN PEOPLE. Nigerians just want free electricity just like they want free fuel and free university education. Well there’s one sure thing….You get what you pay for.

          Enjoy the darkness.

          • FrNinja

            Forte and transcorp are power generating companies . They sell at 19 naira per kwh last I read from one DISCO. The sector is competitive. A distribution company can buy power from transcorp or amperion or egbin or whoever. But I am stuck with a single DISCO.

            The Nigerian consumer doesnt have a choice. He and she is stuck with companies that dont even have money to meter their consumers nor even fix transformers.

            MTN spent over 1 trllion on its network building base stations, laying fiber, implementing billing systems. In four years of power privatization distribution companies hv barely shifted the needle on capex.

            GE with its huge cash holdings thought of investing but ran away when it sighted DISCO accounts. And you are here talking nonsense about a customer having the choice of diesel, solar, etc. Sector has collapsed. Its technically bankrupt.

          • William Norris

            Forte and Transcorp would be thriving if the Discos & TCN could pay them for power generated. Investing in the generating companies is an indirect investment in Discos.

            The Discos don’t have money to pay because they are suffering from a legal low price mandate.

            Solar panels, diesel and petrol tens are competitors to the Discos. THAT IS FACT, most people have a viable CHOICE.

            Nigerians in general, through their government, have CHOSEN to use home generators and solar panels rather than pay higher prices for Disco electricity.

            MTN only had money to build their network because they HAD HIGH PRICES and therefore PROFIT EXPECTATIONS that would justify their initial investment.

            THINK….would MTN have invested if the government had regulated their their tariffs at 5 naira/hour ?

            Those are the FACTS.

            The government right now is preventing those who can afford it from paying for electricity at 65 naira. I myself can pay it, many people I know can pay it. When MTN started I paid 50,000 just for a SIM card and that is how they made money to expand.

          • LagLon

            you’ve got energy…. =;D

          • FrNinja

            You miss the issue. Nigerians would gladly pay the market rate for grid power which is between 36 –
            40 naira per kwh. But that requires that meters are everywhere. It requires opening up distribution to competition by licensing on basis of infrastructure like poles,substations, transformers, etc not geographical area and by licensing multiple retailers to purchase electricity from power companies, pay discos a network use fee for access and vend to customers.

            With this model you will now present consumers with a choice which is not between diesel and the grid but from who and how much electricity to purchase from the grid through pre-pay. In this far more efficient model companies would mushroom generating with coal, wind and solar and distributing through the grid rather than everyone DIY.

          • William Norris

            See, you’re just trying to win an argument. There’s no need for that, let’s just look at things realistically.

            —————————————-
            ” Nigerians would gladly pay the market rate for grid power which is between 36 -40 naira per kwh”.
            ————————————————-

            1. What you put up there is the REGULATED or imposed rate. The market rate would be one freely decided between seller and buyer.

            I myself am willing to buy at 65 demanded by Abuja Disco but the LAW says I can’t pay.

            Just so we’re clear. Regulated pricing causes scarcity. That’s FACT.

            ————————————–

            “But that requires that meters are everywhere. It requires opening up distribution to competition by licensing on basis of infrastructure like poles,substations, transformers, etc not geographical area and by licensing multiple retailers to purchase electricity from power companies, pay discos a network use fee for access and vend to customers”.
            ———————————————

            2. Once again, I repeat- the Nigerian consumer already has alternatives. I’m not making some fantastical claim. Right now, TODAY, consumers can buy diesel or petrol generator or solar systems. I know a bank that uses a solar system.

            They are being LEGALLY denied the free choice of paying for grid electricity at market price which in Abuja is 65.

            3. When the telecoms companies started they didn’t have perfect infrastructure. I remember how they billed people wrongly, how they started out by billing per minute. They were called thieves, monopolist, etc.

            Because they could charge a free market rate, they invested with confidence that they could recoup their investment with a profit.

            No investor or bank can be confident of profit in the DISCOS and therefore will not supply the money needed for buying meters or substations and whatever else. The reason is simple – government is FORCING them to operate at a loss by capping their prices.

            Regulated prices are EVIL. I can illustrate with so many Nigerian examples.

            Are you happy with Federal Universities? They have regulated pricing. That’s why people have to pay BRIBES to get admitted. I have paid such bribes.

            Last year Lagos and Kebbi State governments produced rice that they priced at $12,000 per bag….it was branded LAKE RICE. Ever heard of anyone who actually bought and consumed it at that price? Connected people bought and rebagged and resold at the market price. That’s CORRUPTION.

            3. I’m all about REALITY. I respect human nature. Humans want to make a profit when selling to OTHERS and if they’re allowed to do so, they will produce.

            The colonial system has dehumanized Nigerians. They want everything to be done by FORCE. They want A STRONG leader, they want to FIGHT corruption, they want government to PROVIDE.

            Well it’s time to grow up. The gate of the cage is open….go on and walk out of the Zoo!