NIGERIAN CUSTOMERS PAYING A LOT FOR NOTHING

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By: Ayisha Osori on August 20, 2013

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Last month Twitter-sphere lit up about the increase in fixed charges for consumers using pre-paid meters. Charges have gone up from N245 in 2010 to N300 by 2012; it’s now N702 and will apparently continue to rise. This means when a million Nigerians each pay a fixed charge of N1,000 every month, regardless of whether there is electricity or not, companies earn N1billion a month. In response to the outcry, the Nigerian Electricity Regulatory Commission (NERC) chairman, Dr Sam Amadi, in an interview with Vanguard, allegedly said N750 was not too much and that the Nigerian rate for fixed charges is around the lowest in the world. He went on to say, “the problem we have is that Nigerians are used to paying nothing.”

Let’s put this in perspective. Tribune reported that as of August 12, 2013, Nigeria’s power generation rose to 2,766 megawatts (MW) from 2,628.6MW. This surely has to be the lowest generation of power in the world for what has been spent on the power sector. However, three months ago our electricity distribution companies had reportedly realised N189 billion as revenue despite poor supply to consumers – compared with the N151 billion collected for the entire year in 2011.The situation regarding lack of power is a national disgrace that is compounded by the following issues.

One, there is something really wrong with a system which forces people to pay for something they have not enjoyed and will not enjoy. There is a name for this: exploitation. Or in the development-speak of “Why Nations Fail”, it is a symptom of extractive institutions, i.e., designed to take income, wealth and resources from one larger subset of society for the benefit of a different smaller subset. The second is that we have not heard a fair justification for increasing the fixed charges when the electricity tariffs are going up too (N8.89, N10.99, N12.61). In order for consumers to appreciate the fixed charge which is meant to cover the fixed cost of supply, it would have been useful to explain what these fixed costs are, i.e., is this payment for the electricity cables, the cost of administration, the salaries of employees or maybe the cost of meters since it is still unclear who is supposed to pay for them? The failure of distribution companies to provide meters for their customers has been hinted at by the latest actions of NERC instructing companies to sell the meters and reimburse customers through their bills over time. It is possible that fixed charges significantly higher than the present might be justifiable but the performance to date has simply damaged consumer confidence further. One would also ask: If our large population in Nigeria is supposed to be an advantage, why are the economies of scale not working to the advantage of consumers? Could the problem be tied to the lack of meters? Since the biggest defaulter of electricity bills is reportedly the federal government, then, Nigerians should know if the FG is now fully or partially (if so, to what extent) on meters. If the answer is that much of the FG is still not on the meters, then it means Nigerians who are using pre-paid meters and those who are not (but who continue to get unreasonable bills) are being made to unfairly subsidize the FG. A quick visit by NERC or any interested CSO to some Abuja ministry offices should prove illuminating.

Third is the issue of investment in power a.k.a. privatisation. Carlos Slim – one of the richest men on earth – comes from an extractive society. According to Acemoglu and Robinson, Slim did not make his money by innovation. “His major coup was the acquisition of Telmex, the Mexican telecommunications monopoly that was privatized in 1990.” Slim did not put in the highest bid, but he still won. He did not pay for the shares in Telmex right away; instead he delayed payment and used the dividends of Telmex (after taking control of the company) to make his payments.

What has this got to do with Nigeria and what we allegedly pay for electricity? Probably everything. Dr Amadi explained that, “this new increase is a basic requirement to attract investors in the power privatisation bid process but, as time goes on, the price will drop when investors have recovered their money.” We have our answer. It is not about us. It is about the investors. Only few still argue against privatization, because it is clear that governments don’t have the right incentives to manage utility services efficiently. However, what the telecommunications sector has taught us is that while privatization can revolutionalise and open things up, there are still issues with regulation where consumers continue to be shafted. Despite infrastructure and security challenges, the telecommunication companies are raking in cash, yet services are poor and millions have few options and no redress. There is something painfully unjust about a system which allows the same people responsible for ruining our utilities to buy them. Over $20 billion has been invested in the power sector since 1999 and we are still struggling to produce less than 3,000mw.

It is time Nigerians came together to learn more about the power sector that bedevils us and to make justice in this sector a central issue for every political platform and all politicians. Is the transition to this privatized sector truly evolving in a way that will benefit the Nigerian consumer? If not, what are they going to do about it? Anyone without a B+ answer should not apply for any level of political office in 2015 or beyond.

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