The new electricity tariff

Recently, the Federal Government unexpectedly announced a new tariff regime for electricity consumption in the country. It was unexpected for the reason that Nigerians had hoped that before such major extra demand on consumers of electricity in the country could be made, there should have been significant improvement in what has become a scandalous case of perpetual regress in the country’s energy capability. Indeed, Nigerians have contained with a regrettable run of the ever-worsening availability and quality of electricity. It is so much so that a few hours of electricity supply has become the rule.

According to government, from July 1, 2008, Nigerians will begin to pay more for electricity consumption. Specifically, consumers will now pay N11 per unit of electricity as against N6 as it is currently. However, the people are not expected to start paying this new rate until 2011. Before the implementation takes off three years from now, government will pay the difference in form of subsidy. Already, the Federal Executive Council (FEC) is said to have approved N64.84 billion for this cushioning measure. It is expected to be implemented under a Multi-Year-Tariff Order (MYTO) and a fund will be established under the MYTO to husband the subsidy. It will be called MYTO Support Fund.

Government said under MYTO, its intention is that electricity tariff would be determined by market forces or dynamics. The aim, it also said, is to boost the confidence of lenders and investors in Nigeria’s power sector and equally provide reasonable return on investment. Apart from these, government is hoping that the measure will help correct pricing of power, which will, in concert with other imperatives that would be adopted by the Umaru Musa Yar’Adua administration, facilitate an orderly transition to much more efficient and reliable market-oriented power system.

Theoretically, that sounds perfect under the circumstances. However, we feel very uncomfortable with it. Increase in electricity tariff, in whatever guises or disguises, is not acceptable to Nigerians. For one, government may have been working from the premise that by 2011, the sorry state of the sector would have been arrested. In its Action Plan, which the president bought wholesomely, the Presidential Committee on Accelerated Expansion of Electricity Infrastructure, had, last month, identified, in the interim, mixed power generation of 6,500 megawatts in 18 months and additional 10,000 by 2011.That means that in three years time, Nigeria’s power output would be 16,000 megawatts.

Government’s assumption that it would match the projected output with the new tariff may not be out of place. But from experience, we know that there is always a mismatch between government policies and their implementation. Failures of policies are colossal and they come very often. Of course we grant the present government its rights to dream dreams, but we feel it is dangerous to depend on the strength of a dream and knowing that in the past, such dreams always all of the time, ended up as nightmares for the people.

What it comes to, therefore, is that after these three years of moratorium, the Nigerian people will be expected to start paying the new rate, whether or not government achieved its objectives of facilitating that transition to efficient and reliable market-driven power sector.
What we expected government to have done was to set up a tariff structure for the operators. In that structure, there would be a range of prices from a minimum to a maximum. In which case, the rate would be flexible and they would start from the minimum and advance towards the maximum, apropos to the progress made in improving and stabilizing the system. Again, our fear derives from the perennial upheaval that the petroleum subsidy causes in this country. From our experience as a country, the principle of subsidy has never worked seamlessly because government and the people are never in agreement as to what constitutes subsidy and to what extent and under what conditions it should apply.

So, Nigerians are suspicious of, if not sensitive to the word, subsidy. In the real sense of it, subsidy, in our own condition, is not necessarily a free lunch because the resources that should have been used for say, education, would then be committed into something else that does not have real, direct impact on the fortunes of the people. Government should have waited until that stability is achieved before raising tariff. The truth is that Nigerians are willing to pay so much as long as what they are asked to pay for is available and can give them maximum benefit and satisfaction as with electricity.

Undoubtedly, aside from corruption, the greatest challenge confronting Nigeria today is energy. The present government has shown sufficient concern but concern is not enough. There must be realistic, corresponding actions. Although we commend the government for its concern to improve the condition of the country’s energy, we wish to remind it that whatever measures it considers, must be kind and considerate to the people. Nigerians have paid so dearly in this country for governments’ inefficiency, insincerity and outright betrayal of their hopes and aspirations.
Indeed, this country needs to get her energy sector running because every other thing depends on it.