Private Sector Operators Back Cost-reflective Tariffs

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Muda Yusuf

Dike Onwuamaeze and Chris Uba

Some representatives of the Organised Private Sector (OPS) have welcomed the approval of cost-reflective tariffs for the electricity sector by President Muhammadu Buhari.

THISDAY had reported that President Muhammadu Buhari had finally approved the official implementation of cost-reflective tariffs for the Nigerian Electricity Supply Industry (NESI).

The new tariff, which will now formally commence on September 1, 2020, was one of the preconditions given by the World Bank for a $1.5 billion loan for Nigeria.

Speaking in a chat with THISDAY, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, described the proposed introduction of cost reflective tariffs for the pricing of electricity supply as inevitable and the only alternative to the unsustainable subsidisation of electricity consumption in Nigeria.

Yusuf said that payment of “cost-reflective tariffs is a difficult option, especially given the prevailing economic conditions. But it is the most sustainable option that would salvage the power sector and attract investment.”

He, however, advised that it was important to fix the numerous inefficiencies that characterised the entire power sector value chain and inspire the confidence of electricity consumers through a robust metering programme and guarantee of value for money.

Also, the Director General of Nigeria’s Employers’ Consultative Association (NECA), Mr. Timothy Olawale, said businesses would not be opposed to the payment of cost-reflective tariffs, if electricity would be provided.

He, however, recommended that, “a staggered approach to cost and service-reflective tariffs. This will allow the Discos to enter into agreements with ‘customer clusters’ for cost-reflective tariffs pegged at an improved quality of service level. These customer clusters will act as test cases for the success, failure and adaptability of the cost and service mechanisms instituted
under the service level compacts.”

He also called for a timeline for the installation of pre-paid meters for all consumers before the introduction of cost reflective tariff regime in order to increase the confidence of Nigerians instead of the current controversial estimated billing of consumers.

Olawale said that the urgent implementation of the cost reflective tariffs of pricing of electricity, among other options, is one of the ways of reviving the country’s economy because the survival of the power sector is important for the industrialisation and economic renaissance of the nation.

However, the Manufacturers Association of Nigeria (MAN) noted that there was no investment on ground to assure consumers that the cost- reflective pricing of electricity tariffs would translate to better supply of power in the country.

The Acting Director General of MAN, Mr. Ambrose Oruche, in an interview with THISDAY said: “There is no investment on ground to assure us that an increase in price will bring about the same proportionate increase in supply of electricity. Yes, we want a willing-buyer and a willing-seller but there must be an assurance that the power supply will be there.

“That is why we are calling for the creation of mini grids across the country because this humongous national grid that takes electricity and throws it away to the sky and it disappears cannot give us guaranteed power supply. A regional grid will improve the possibility of power supply than what we have now.”

Oruche also stated that it would be a miscalculation for the government to think that investors would rush to the power sector if the tariff is increased. “Investors will look at the purchasing power of your citizens. How many of us can afford to buy electricity at a higher cost? Our people will suffer because electricity will be out of their reach. Many Nigerians are unemployed. A population of 200 million people will not command effective demand if the majority are poor and unemployed,” he said.

He also advised the federal government that the current situation that industries and businesses are struggling to survive the effects of COVID-19 on the economy is not the proper time to introduce effective cost tariffs for electricity supply in Nigeria. “My advice is that now is not the time to do this. Let us allow industries that are struggling with COVID-19 distress to be able to sustain themselves. Unless we are saying that the negative economic growth of 6.1 per cent the country recorded in the second quarter of 2020 is good enough because what we will have next time will be above 10 per cent negative growth,” Oruche said.