Ever Wonder Why Electricity Supply Have Not Improved ???

First published: 11 November 2010 at 14:07

Source: BEHIND THE FIGURES by Ijeoma Nwogwugwu

ijeomanwogwugwu@thisdayonline.com

Bankole’s Fear of the Unknown

At the instance of the Presidential Task Force on Power, a meeting was held two Wednesday’s ago between members of the task force and the leadership of the House of Representatives to brief the latter on the road map for the power sector reform programme. During the course of the meeting, Dimeji Bankole, speaker of the House, breezed in mid-stream, staying all of five minutes.

In those precious few minutes that he gave the task force, he made it clear that he had issues with the road map being implemented by the federal government. According to him, the road map did not have the input of the House of Representatives, nor did the government deem it necessary to consult stakeholders before formulating the roadmap. Using one such stakeholder as the perfect fodder, Bankole stated that no consideration was being given to importers and suppliers of generators, which by his estimate is a billion dollar industry that needs to be protected.

Having made his opinion known, he declared the work of the task force (and by extension the federal government) null and void, following which he walked out of the meeting. No questions were asked, no effort was made by the “Right Honourable” to tarry a moment longer to listen to the submissions of the task force. Nor did he bother to glance through the document prepared by the task force for him and his leadership.

He even forgot that the reform programme has the legal backing of the Electric Power Sector Reform Act passed into law by the National Assembly in 2005. Bankole came into that meeting with a preconceived notion, one that he was in no mood to shift grounds on, one, if care is not taken, could cost Nigeria dearly.

In the three years that he’s been speaker and the fourth highest ranking government official in the federation, Bankole has probably forgotten how much it costs to buy, service and run a generator in his home and office for a month, much less a whole year. Such expenses, I expect, are catered to by the state. He possibly doesn’t even know the cost of diesel or how much of the fuel is required to run the generator and back-up units in his residence and office. Yet, he has a keen interest in seeing that importers of generators are protected. With leadership like this, it is no wonder Nigeria remains underdeveloped.    

While there is no evidence to suggest that the speaker is an importer or supplier of generating sets in the country, neither is this column interested in ascertaining if he has a direct or indirect interest in companies involved in the billion dollar (his estimate) generator supply industry in Nigeria. Bankole’s vituperations, however, lent credence to past fears expressed by several sections of the public that there is a cabal colluding with the Power Holding Company of Nigeria to keep uninterrupted electricity supply at bay in order to sustain the generator supply industry. Again, this column has no interest in promoting claims of the existence of a cabal, but it is anxious that Bankole’s utterances suggest a level of ignorance that is not limited to him alone.

Bankole and others sympathetic to the generator supply industry are under the illusion that once Nigeria ’s urban centres attain regular electricity supply, this will put paid to the importation and consumption of power generators in the country. It will not. The rate of demand and usage might fall slightly in towns and cities, but back-up generating plants will always remain a requirement of our daily lives for a variety of reasons.

It may interest the speaker to know that even the most advanced countries in the world suffer from periodic power outages caused by faults at power stations; damage to power lines, substations or other parts of the distribution system; short circuiting; inclement weather conditions and natural disasters; or the overloading of the electricity grid by consumers, especially during hot climatic conditions when more air conditioning is in use.

Such outages may be far and in between, but they can not be ruled out, and are oftentimes unforeseen. In other words, no electricity grid can guarantee 100 percent redundancy, because electricity systems exhibit unavoidable disturbances of all sizes, sometimes equivalent to the size of the entire grid. This phenomenon has been attributed to steadily increasing demand/load, the economics of running a power company, and the limits of modern engineering.

The impact of power outages in developed countries can lead to untold damage, costing businesses and consumers several billions of dollars. It is for this reason certain businesses, hospitals, factories and utilities in these countries have back-up generators and UPS’ to protect sensitive equipment and machinery from unanticipated power surges and outages.

In Nigeria ’s case, it is expected that back-up generators will still be imported into the country. But whilst a drop in consumption by residential and corporate consumers should be anticipated, hospitals, factories, air and seaports, telecom and water utilities, industrial estates, and remote oil and gas installations as well as other extractive industries, would still have to install and maintain power generators in the event of outages.

Added to this class of consumers, are large swathes of rural communities still not connected to the electricity grid, which will start buying smaller and mid-sized generators as the economies in those areas open up. Indeed, estimates show that 70 percent of Nigeria is not connected to the grid, implying that the immediate and medium-term impact of the power reform programme will be limited, in the first instance, to mostly urban areas before reaching rural consumers.

But beyond Bankole’s uninformed commentary is the fact that he is inclined to protecting a billion dollar industry, rather than supporting reform initiatives that will eliminate power outages, promote industrial growth leading to the emergence of multibillion dollars industries, and engender economic growth capable of catapulting Nigeria into the league of leading economies as envisioned under the Vision 20:2020 plan.

Perhaps some enlightenment on the cost of substitution energy will help to convince the speaker on why power reform is absolutely necessary for economic development: Studies undertaken by experts and as contained in the power reform road map document, which Bankole ignored, show that the amount of diesel and petrol self-generating capacity in Nigeria ranges from a low of 4,000 MW to a high of 28,000 MW.

For the sake of this article, if were to lean towards a conservative estimate 6,000 MW as the amount of total diesel and petrol self-generating capacity consumed in the country that runs, on average, for 12 hours a day, the unit cost of this self-generated electricity will be at least N45 per kilowatt hour. In total, therefore, Nigerians spend more that N1.1 trillion per annum on self generated electricity, which is not only criminally exorbitant, but is causing long-term damage to the environment.

If all of this self-generated electricity was supplied by the electricity grid at an average end-user tariff of N21 per KWh, the tariffs paid by Nigerian consumers would be N799 billion, or 61% of what they are paying now. In the end, will it not be better to implement an increase in end-user tariffs as recommended under the power reform programme so that Nigerian consumers pay substantially less for their electricity than they are currently paying today?

More important, there is, of course, a limit to which self-generation can make up for the insufficiency of Nigeria ’s electricity supply. Most Nigerian households cannot afford the capital costs involved in purchasing diesel and petrol generators. Besides, Bankole must surely know that the high cost of diesel generation cripples the growth of the country’s productive and commercial industries. Hence, the cost of Nigeria ’s woefully inadequate electricity supply is not just the cost of substitution energy. It is the much larger cost imposed on the country’s economic development by virtue of all the productive activity that is aborted – or never conceived in the first place – because of the inadequate power supply.

If Nigeria fails to implement a comprehensive reform programme supported by a viable pricing regime that attracts investment into the power sector, the opportunity cost in lost GDP by 2020 will amount to a figure equivalent to N20 trillion (in real terms) every single year. Thus in the absence of a radical change in the way the electricity sector is managed, the real prospect is that Nigeria ’s GDP by 2020 will be N20 trillion per annum less than it should have been.

As Bankole takes in the data summarised above, he should also give some contemplation to the future. Also as he seeks relevance and throws his weight all over the place, power, he should remember, is transient. Who knows what tomorrow will bring. Come May 29, 2011, he may no longer be speaker, or even worse, a member of the House of Representatives. When that time comes, he will feel the same pain afflicting other Nigerians who spend thousands and millions of naira every year running their generators.