POWER SUPPLY AND BUSINESS ENVIRONMENT
The cost of fitful supply of power is high on the economy
It is a notorious fact that the epileptic nature of power supply makes Nigeria one of the harshest environments to do business, and this renders the country less competitive. The implications are there for all to see. In the face of fitful electricity supply, individuals, and businesses resort to self-help by generating their own power. Yet privately generated electricity also comes at a huge cost. This is aside the negative implications of the more expensive and self-generated electricity on the cost of living, on business profitability, on the incidence of poverty, and on health, safety, and the environment.
In its report on the impact of regular power cuts last year, the World Bank said the economic cost of power shortages in Nigeria is estimated at around $28 billion – equivalent to 2% of its Gross Domestic Product (GDP). “The lack of reliable power has stifled economic activity and private investment and job creation, which is ultimately what is needed to lift 100 million Nigerians out of poverty,” said Shubham Chaudhuri, World Bank Country Director for Nigeria. “The objective of this operation is to help turn around the power sector and set it on a fiscally sustainable path. This is particularly urgent at a time when the government needs all the fiscal resources it can marshal to help protect lives and livelihoods amidst the COVID-19 pandemic.”
Unfortunately, the situation has worsened in the past one year. From Kano to Calabar, Sokoto to Ibadan, indeed across the country today, there is hardly any part that does not presently experience power failure daily. In most of these places, several days go without electricity with its resultant effects on socio-economic activities. The promise that the reforms in the power sector would lay a solid foundation for sustainable power generation, and would lead to increased access to electricity, engender private sector investments as well as create employment for the growing population of jobless Nigerians, has become a mirage.
Going by the World Bank projection, Nigerian businesses experience an average of 239 hours of power outages every month with about US$0.20 to 0.30 per kilowatt hour (kWh) spent on self-generation. The situation results in economic losses exceeding $25 billion annually to the country. The damage to the environment and the health hazards to Nigerians are also quite enormous.
Indeed, analysis of firm-level data from the Nigeria World Bank Enterprise Survey showed that electricity supply is consistently the biggest constraint to doing business in the country. It equally added that on geopolitical region case-by-case analysis, electricity or its lack, is the most important obstacle except the northwest geopolitical region. Younger firms, exporters, and manufacturers, the report noted, are from its discovery most likely to identify electricity access as a key obstacle to their productivity, yet, having a reliable electricity supply is consistently associated with higher levels of economic productivity.
Data from the Advisory Power Team in the office of the Vice President, Prof. Yemi Osinbajo, have also shown that on average, Nigeria is only able to generate and distribute 4000 megawatts (MW) to power its economy and light up homes. And that does not just push businesses to seek off-grid alternatives or cause economic losses, but also creates payment apathy by consumers who do not feel obligated to pay for electricity services they consider to be unreliable.
For several years, the challenges of poor electricity supply and its attendant impacts on businesses have headlined conversations in almost every economic summit or forum in Nigeria. But it is now time to move such conversations from the meeting rooms to the fields.