Nigeria’s economic woes deepen as power grid collapse persists

• Economy loses $29bn annually- IMF
• Estimated billing worsening power outage- NBS

ONOME AMUGE

The Nigerian government has, since its self-rule, been marked by a long and troubling history of mismanagement and economic missteps. So persistent have these failings been that current leaders are almost always judged to be less competent than their predecessors, with expectations set ever lower as each successive administration takes office.

This lack of reliable power has become a source of frustration and resentment for Nigerians, who have made it clear that any administration that can solve the country’s electricity woes will be lauded as a monumental success, regardless of other shortcomings.

Indeed, many Nigerians have gone so far as to say that, even if a government were to otherwise fail on all counts, they would still commend it for managing to provide 24-hour electricity—a basic standard in developed nations but a rare and cherished luxury for most Nigerians.

Nigerians found themselves in a troubling situation recently as the country’s national power grid collapsed not once, not twice, but an alarming three times in a single week, a deeply concerning pattern that has occurred twelve times since President Bola Tinubu was sworn into office in May 2023.

In a tragic mismatch between potential and reality, the resources at Nigeria’s disposal, including 200 trillion cubic feet of gas, a network of rivers perfect for hydropower generation, and abundant sunshine ideal for solar energy, have failed to provide sufficient electricity which is a basic necessity of modern society.

The inability of Nigeria, a country with about 128-year history of electricity generation, to deliver a reliable and consistent power supply to its citizens is a painful illustration of the chronic mismanagement, corruption, and neglect that has plagued the nation for generations.

Despite the abundance of natural resources at its disposal, the Nigerian government has failed to translate this potential into tangible benefits for its people, depriving them of the basic infrastructure and services that are the hallmarks of a modern society.

Amid the massive demand for electricity in Nigeria, estimated at 40,000 megawatts, the country’s electricity grid is  faltering under the weight of 12,522 megawatts of installed capacity which is able to provide just 4,200 megawatts of electricity to the nation’s citizens.

The national grid’s fragile state is such that even when it managed to reach a rare peak of 5,100 megawatts, Distribution Companies (DisCos) were forced to reject the excess power due to their weak infrastructure.

Decades of struggling with inadequate power supply have been a drain on the Nigerian economy, as estimated by the International Monetary Fund (IMF), which puts the cost of the problem at $29 billion annually.

The losses were recently affirmed by Akinwumi Adesina, president of the African Development Bank Group (AfDB),who observed that the country’s annual loss of $29 billion is due to unreliable power supply.

Adesina noted this during his lecture titled “Building a Global Nigeria” at the 90th birthday celebration of retired General Yakubu Gowon in Abuja.

According to the AfDB chief, the devastating impact of unreliable power supply on the Nigerian economy, has led to 5.8 percent loss in the country’s gross domestic product (GDP).

“Today, Nigeria is the number one country in the world in terms of the total number of people without electricity,” he noted.

Adesina explained that Nigeria’s manufacturing industry was being crippled by the high costs and unreliability of electricity supply, pointing out that the ongoing issues with load shedding and inconsistent power availability were leading to an unfavourable manufacturing environment with high costs and reduced competitiveness.

Speaking with concern about the current state of affairs, Adesina also stressed that many Nigerian manufacturing companies are forced to resort to generating their own electricity, heavily relying on costly and inefficient generators, diesel, and heavy fuel oil.

Adesina stressed that the Nigerian government must prioritise solving the country’s electricity crisis if it hopes to achieve its aspirations of economic prosperity and global prominence.

Muda Yusuf, director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), expressed concern over the frequency of national grid collapse in Nigeria.

In his remarks, Yusuf pointed out that energy is a key component for the effective functioning of businesses and the well-being of the general public, stressing that the nation’s power sector problems represent a huge obstacle to the country’s economic development.

The CPPE CEO in a note obtained by Business a.m., stated, “So, anytime there is grid collapse, it dislocates the activities of citizens and businesses because the cost of alternatives, mostly the Premium Motor Spirit (PMS) also known as petrol and diesel are very prohibitive.

“That is why it is very concerning. This is why we need to expedite actions on reforms to decentralize sources of energy so that we do not over-depend on the grid.

“We need to work toward enabling renewable to play increased roles in the nation’s energy mix by removing all forms of taxes and levies. This would go a long way to make the cost of renewable more affordable to Nigerians.”

Adding insult to injury, Nigerians have been left to bear the brunt of the power crisis not only in the form of power outages and unreliable electricity, but also in the form of exorbitant differential electricity tariffs, a burden that they must endure as a direct consequence of the systemic inefficiencies and mismanagement that plague the country’s energy sector.

In a recent report released by the National Bureau of Statistics (NBS), it was revealed that 85.2 percent of Nigerian households still rely on the controversial and widely criticised estimated billing system for their electricity tariffs.

The report, titled “Nigeria Residential Energy Demand-Side Survey Report 2024”, showcased the overwhelming reliance on this billing method, leaving only 14.8 percent of households utilising the comparatively accurate and transparent prepaid billing system, as at August 2024.

The survey’s findings, encompassing states from each of Nigeria’s six geopolitical zones, revealed that households across the country receive, on average, just 6.6 hours of electricity per day, falling well short of the 20-hour target set for Band A customers.

This disappointing disparity, despite the fact that regulators identify Band A consumers as constituting only 15 percent of the overall electricity consumer base, is yet another symptom of the chronic electricity crisis that continues to plague the nation.

The survey explored a range of states across Nigeria, including Oyo in the Southwest, Enugu in the Southeast, Bauchi in the Northeast, Kwara in the North-Central, Akwa Ibom in the South-South, and Sokoto in the Northwest.

The survey’s state-by-state breakdown  showed that Bauchi State has the highest proportion of households relying on the estimated billing system, with 97.9 percent of households using it. Sokoto State isn’t far behind with 97.3 percent reliance on estimated billing, while Plateau State reported the lowest usage rate at 69.1 percent, which is still a high rate by any standard.

In  contrast to the estimated billing trend, a different pattern emerged when it came to prepaid meters. Plateau State led the pack with the highest adoption rate, with 30.9 percent of its consumers opting for this method, followed by Oyo State at 27.6 percent.

Meanwhile, Bauchi State, which primarily uses the estimated billing system, had the lowest adoption rate of prepaid meters, with  only 2.1 percent of its residents utilising the alternative billing system.

According to the report, the average Nigerian household spends around N4,155.8 per month on electricity.

Further analysis of the state-level data revealed that households in Enugu State had the highest average monthly electricity expenditure at N7,319.4, followed by those in Plateau State at N6,153.6, while Bauchi State registered the lowest monthly electricity expenses at N2,647.7.

In response to the worrisome impacts of estimated billing on Nigerian society, Business a.m. discovered that residents of communities comprising Ajao Estate, Mafoluku, Oshodi, and Isolo, have taken legal action by filing a class action suit against Ikeja Electric (IE) at the High Court of Ikeja in Lagos State.

The case, filed with Suit No. FHC/L/CS/1288/2024, indicates the frustration and desperation of many Nigerians who have been affected by the practice of estimated billing and are seeking justice through the judicial system.

A public announcement to this effect, read partly “This is to inform the communities of Ajao Estate, Mafoluku, Oshodi and Isolo that a class action has been filed against Ikeja Electric (IE) at the High Court of Ikeja, Lagos State with Suit No. FHC/L/CS/1288/2024.”

The residents who filed the lawsuit are seeking legal relief from the court, including a declaration that estimated billing is both illegal and non-binding on customers, and therefore should be abolished.

Furthermore, they stated that the backlog of “crazy bills” and associated payment plans are inexplicable, illegal, and should not be imposed on customers, and hence must be abolished as well.

Faced with the ongoing liquidity crisis in Nigeria’s electricity sector, analysts have highlighted the importance of addressing the metering gap as the key solution.

They argue that the dearth of meters, which stood at over seven million as at May 2024, has led to a vicious cycle of distribution companies being unable to accurately collect revenue from consumers, resulting in significant financial losses and the continued reliance on estimated billings.

To tackle the liquidity crisis and put the sector on a sustainable path, experts assert that harmonising electricity distribution with generation is essential, and this can only be achieved by closing the metering gap and ensuring accurate billing for all consumers.

In a move aimed at addressing the lingering issue of the metering gap, the Nigerian Electricity Regulatory Commission (NERC) recently mandated the country’s 11 DisCos to allocate a total of N275 billion over a four-year period from 2024 to 2027 for the procurement of meters.

To lend support to Nigeria’s metering gap problem, the World Bank introduced a $500 million metering programme, with $155 million allocated to provide meters directly to consumers and $345 million earmarked to aid the country’s DisCos in improving electricity supply.

Bayo Adelabu, the minister of power, in a statement, confirmed that the government had received part of the World Bank’s allocated funds and that 1.8 million meters were on their way to Nigeria to tackle the issue of estimated billing.

In highlighting the African Development Bank’s role in supporting Nigeria’s power sector,Adesina pointed out that the bank had invested heavily in the country’s electricity sector, specifically providing $200 million for the Nigeria Electrification Project to bolster the Nigerian government’s Power Sector Recovery Programme.

“To support Nigeria and other African countries, the AfDB invests massively in the continent’s power sector.

“This is through provision of 200 million dollars for the Nigeria Electrification Project, which is designed to fill the country’s electricity access gap.

“We have also invested 210 million dollars in the Nigeria Transmission Project to strengthen the grid power evacuation and regional interconnection, ” he stated.

Expanding on AfDB’s energy strategy, Adesina highlighted the Desert to Power initiative as a major component of this plan, which he described as a $20 billion programme designed to provide electricity to 250 million people across 11 countries in the Sahel region.

This initiative, according to Adesina, will have significant implications for Northern Nigeria, where the programme aims to deliver electricity to millions of people.

Yet, as Nigerians hold their breath in anticipation of the long-awaited improvement, President Tinubu’s New Year Speech stands as a reminder of the monumental task ahead.

In his address, the president emphasised the importance of a robust and reliable power sector for the nation’s economic transformation. The impact of his administration’s performance in the electricity sector, therefore, will undoubtedly serve as a crucial yardstick for measuring the success or failure of his tenure.

Whether the president will succeed in bringing about the much-needed transformation of the power sector remains to be seen, but one thing is certain- Nigerians will be watching closely, and history will be the final judge of his achievements.