For some time now, the nation has been plunged into a major blackout with the collapse of the national grid that has forced businesses and homes to rely on alternative sources of power, with its attendant cost implications. Economic watchers, however, warned that placing extra burdens on businesses will worsen the current economic problems besetting Nigeria, which is on the verge of transiting power to a new administration, reports Festus Akanbi
Despite the reluctance of the current administration to accept the ranking that placed Nigeria as the world’s 11th most miserable country for 2021, analysts argued that current realities have removed all shades of doubts about the ranking that captures the growing frustration of Nigerians over their poor conditions of living.
This development coincided with the last week’s report of the World Bank that inflation in Nigeria, which it stated is already one of the highest in the world before the war in Ukraine, is likely to push an additional one million Nigerians into poverty by the end of 2022.
This was disclosed by the global financial institution in its latest Nigeria Development Update (NDU) report, titled, ‘The Continuing Urgency of Business Unusual’, which was released last Tuesday.
Growing Misery
According to the multilateral institution, Nigeria is in a paradoxical situation: growth prospects have improved compared to six months ago but inflationary and fiscal pressures have increased considerably, leaving the economy much more vulnerable.
Nigerians are now getting used to the absurdity of sustained deterioration of standards of living in a country where costs are skyrocketing whereas wages remain largely unsustainable.
For instance, available data showed that Nigerians were worse off last year than they were in 2020 as the country was ranked the world’s 11th most miserable country for 2021.
The 2021 Annual Misery Index, which analysed 156 countries, had shown that Nigeria moved from the 15th position in 2020 to the 11th position in 2021. The index modified by Steve Hanke, a popular professor of applied economics at Johns Hopkins University, also shows that the ranking placed Africa’s biggest economy as the fourth most miserable country on the continent.
According to Hanke, his version of the misery index is the sum of the year-end unemployment, inflation, and bank lending rates, minus the annual percentage change in real GDP per capita.
Analysts said they were not surprised as the country’s high inflation and unemployment rate, which are among the highest in the world, mirrored the high level of misery in the country.
Like a country under a spell, almost everything is going in the opposite direction. From the collapsed national grid and the attendant nationwide blackout to excessive borrowings of the federal and state governments which analysts said is already mortgaging the future of the country, and of course, the frightening dimension to the problem of insecurity as terrorist activities makes intra-and interstate movements/businesses a great risk.
For instance, Nigeria has, in the past few weeks, been plunged into a nationwide blackout, as a result of the incessant collapse of the national grid, with businesses and homes having to rely on generators and solar energy power. The situation is so bad that the presidential candidate of the opposition party, the Peoples Democratic Party PDP), Alhaji Atiku Abubakar taunted the federal government for the failure to stabilise the national grid, and arrest the emerging threats to governance and the attendant erosion of standards of living in the country.
According to him, the latest collapse of the national grid was a metaphor for everything that has gone wrong in Nigeria.
Atiku wrote: “The darkness that has enveloped the nation in the last couple of days with the collapse of the national grid is a metaphor for the collapsing state of our nation: collapsing unity, collapsing security, collapsing economy, collapsing education, collapsing well-being and collapsing value of human life and dignity.”
Huge Economic Loss
Although the federal government-owned Transmission Company of Nigeria (TCN), which manages the grid had at some point said grid collapse happen globally, the collapse of the power supply, each time it occurs, comes with a huge economic loss for consumers, especially commercial entities.
In Lagos, Abuja, Kano, and Port Harcourt like in other major towns, it is a sad period for business promoters who have to incur heavy costs for power generation given the prohibitive cost of diesel. The situation is so bad that some hotels are losing customers daily as operators are being forced to cut down periods when guests could enjoy power supply, mostly from generators.
Nigeria is endowed with large oil, gas, hydro, and solar resources, and it has the potential to generate 12,522 MW of electric power from existing plants. On most days, however, it is only able to dispatch around 4,000 MW, which is insufficient for a country of over 195 million people.
Not only does poor power supply cripple businesses, but it also comes with environmental costs. The constant use of generators that emits fumes into the atmosphere, increases air pollution which affects climate change and human health. In turn, environmental damage can result in agricultural job losses, the ripple effects are countless.
According to economists and researchers, energy is the engine that drives the economy of a nation forward, therefore poor energy supply greatly affects a country’s economic growth. It is therefore paramount for any nation that wants to see the country’s economic boom, to invest heavily in ensuring that there is a constant power supply.
It is a known fact that when small businesses thrive in a country, it acts as a catalyst for economic growth. Therefore when small and medium-scale businesses are affected because of poor power supply, it stifles the growth of the economy. Nigeria’s major shortage of reliable power supply is a major constraint to the country’s economic growth.
A large number of them have opted for the use of solar energy while some use petrol and diesel-powered generators. This has seen them spend heavily on petroleum products which has affected their revenue. Small businesses are the ones most affected, as a large percentage of them depend heavily on power to run their business. Constant use of generators to run their business has seen them accrue losses with little or no profit.
Analysts explained that the unfortunate situation in the country has turned Nigeria into one of the harshest environments to do business, which has rendered the country less competitive and has also caused some businesses to move out of the country.
Borrowing Spree
Unfortunately, the current financial position of the federal government is not helping matters as it embarks on a borrowing spree from local and external lenders. Last week, there were reports that the federal government’s total borrowing from the Central Bank of Nigeria through Ways and Means Advances rose from N17.46trillion as of December 2021 to N19.01 trillion as of April 2022.
According to data from the CBN, this represents an increase of N1.55 trillion within the first four months of 2022.
The N19.01 trillion owed to the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N41.60 trillion as of March 2022, according to the Debt Management Office.
The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory.
Commenting on the collapse of the national grid and its implication for the nation’s economy, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, called for the urgent decentralisation of the country’s national grid as well as incentivising other sources of energy in the country. According to him, “The impact of this crisis is very obvious and you know right now energy cost has gotten to a level that is now almost unbearable. Both industry players and households are suffering. When you have this kind of collapse the alternative is to self-generate and now with the cost of diesel and gas, Nigerians are at loggerheads.
“We are creating problems and agony for investors in this economy because already they have enough troubles such as Forex, logistics, credit, and insecurity. If on top of this we are faced with this energy crisis, this is the worst time to experience system collapse because it’s simply unbearable. More businesses have closed down because there was no way they could just continue buying diesel as high as it is now. Most service centres like some hotels have shuts business because it doesn’t add up. The implications are very severe in terms of the ability to continue to sustain the business, erosion of the profit, and ability to create employment or sustain the already existing employees. This is even more critical for energy-intensive businesses, especially those in production, IT, Telecoms, and the banks. It’s a major issue for the economy and the welfare of Nigerians.
