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Increasing electricity tariff will cause a big trouble – Olubiyi

Optimist Gists

 Electricity is essential to the economic and social interests of any nation. However, Nigeria is a country still overwhelmed and plagued with electricity concerns: from low generation, poor supply to load shedding and rationing; in fact, with frequent power outages and this has become the bane of the citizenry and entrepreneurs.

In addition, with the monopoly structure of the electricity market in Nigeria, consumers are often billed for electricity not consumed in the form of “estimated billing”.

Electricity is, therefore, the main infrastructural deficit affecting Small and Medium-scale Enterprises, SMEs, particular those in manufacturing and this is holding back the full economic potential of this very important sector.

Recall, Nigeria’s power sector was previously publicly run but has been privatised since 2005 with the signing of the Electric Power Sector Reform, EPSR, Act which unbundled the old National Electric Power Authority, NEPA.

The Federal Government has since separated Power Holding Company of Nigeria, PHCN, into eleven distribution firms, six generating companies, and a transmission company

But yet, the sector is rattled by political, commercial, market and consumer-related issues and stakeholder management concerns. In this article, power and energy are used interchangeably to mean the same thing.

Nigeria is the largest economy in sub-Saharan Africa ahead of South Africa in the recently released year 2020 data, but with huge limitations and shortcomings in the power sector. Currently, Nigeria has the potential to generate 12,522 megawatts, MW, capacity but is operating at a capacity of only 3,500 MW to 5,000MW which is grossly insufficient.

Arguably, Nigeria is estimated to require about 88,282 megawatts, MW, to meet the demand of its fast-growing economy according to experts. This figure was arrived at with the consideration of the key drivers of energy demand, namely population, demography, energy intensities, energy efficiency,and socio-economy activities.

The increase in demand for electric power is obvious due to increased population, urbanisation, SMEs and greater need for housing electrification.

SMEs in Nigeria, typically the manufacturing companies, experience power failure severally per week without any prior notice which imposes a huge cost on the value chain: from idle workers, spoiled materials and equipment, lost output, low demand coupled with the costs of providing alternative electricity

All these could lead to an increase in business uncertainties, an increase in operational costs, reduced competitiveness and lower return on investment.

The visible truth is that most SMEs lack the capability and financial wherewithal to provide constant alternative energy supply in the absence of steady electricity

The outbreak has already affected all economic activities, therefore a hike at this time will aggravate the despair and frustration of Nigerians.

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