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The new electricity
tariff
By Sun News Publishing
Monday, May 12, 2008
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.
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