Good Economics is Bad Governance and Bad Governance is Good Economics: The Case of Nigeria’s Power Sector
The apparent inconsistency of power supply in the nation is enough evidence that the power sector isn’t where it should be.
From the year 1999 to present, about 2.4 trillion naira has been appropriated to the power sector. Nigerians haven’t experienced a significant increase in power supply.
Due to the current recession, Nigeria is striving to employ diversification of its economic resources as a means to bring the country out of its current situation. In line with this initiative, the federal government has strongly encouraged investment in agriculture and industry, particularly Made -In -Nigeria products.
Lack of dependable electricity stands to put limitation on this resource diversification strategy. Manufacturing and agro- processing are heavily dependent on electricity and the to-go-to alternative method of power supply through generators is not cost effective and dissuasive for investors.
At a Power Summit on the Nigerian Power challenge, Dr.Frank Udemba Jacobs President, Manufacturers Association of Nigeria mentioned that the average amount of light given to manufacturers per day is between 4-6 hours. He further stated that from 2015 to 2016, 50 manufacturing companies closed down due to the inefficiencies of the power sector.
On the 7th – 8th of February, the National Assembly hosted a summit in Abuja to provide stakeholders in the power sector an opportunity to voice out challenges within the legislative body relating to the power sector that need to be developed or modified. The event was graced by top dignitaries such as the Senate President Bukola Saraki, Speaker of the House of Reps Yakuba Dogara as well as the Minister of Works, Power and Housing Babatunde Fashola.
Amongst these stakeholders, the mutual challenges outlined included lack of cohesion in government polices, lack of compelling investment incentives, liquidity challenges, lack of cost-effective tariffs as well as rising debts resulting in numerous court cases.
Amongst other impediments to efficient power supply, the lack of cost effective tariffs is the primary deterrent to power inefficiency and low interest of investors.
Cost-effective tariffs are very crucial to investors. Currently, the power sector is operating at a loss because costs exceed profit. This leaves the power sector at a loss. Consumers are not paying a fair price for the amount of energy they consume.
Compared to other developed countries the cost of electricity in Nigeria is significantly low. This is evident in the consciousness of the use of household appliances. It is not particularly rare to walk into a naturally lit room during the day in Nigeria and find several light bulbs on. However, you can’t say the same for a country like England due to higher tariffs. People in the western parts of the world are more frugal with their use of electricity due to higher tariffs compared to what Nigerians are charged.
The way forward is for the government to employ investment incentives through committing to cost effective tarrifs.
The government also needs to adhere from overregulating price and allow market forces determine a fair tariff for both suppliers and consumers. This will encourage investment and improve the energy generation capacity and in turn provide more constant supply of electricity in Nigeria.