Nigeria’s “crazy” electricity bills drive people into poverty

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The country’s power sector was privatized in 2013 to end decades of relative darkness, but things have only gotten worse in the hands of private investors.

Abiola, a young woman in her thirties, owns a store on University Road in Ilorin that sells frozen foods. The business relies heavily on electricity, but it rarely comes. And when it does, it happens sparse and adds up to an average of four hours a day.

Despite the ongoing blackout, the monthly bills were “crazy”. It averaged 13,000 naira ($ 31.52) per month. So she thought she had enough and in 2016 she decided to buy a prepaid meter hoping to only pay for the electricity she used.

But while this may have been the case, she has difficulty understanding the tariff plagued by constant increases.

” This month I topped up three times this month: the first time, 5000 naira ($ 12.14); the second time 3,000 naira ($ 7.28) and now I’ve made another 7,000 naira ($ 16.99) and that’s just the middle of the month. And there is no light, yesterday we only had light for two hours and it came at midnight, “Abiola said TRT world. The crunch of their gasoline-powered generator could be heard right outside the store.

With little choice, she relies on the generator to maintain her three fridges to keep business going, but the cost of running the generator for most of the day goes deep into her daily profits, she said. Every day she spends between 4000 naira and 5500 naira (9.7-13.3), which is a significant percentage of her daily profit.

It is a common sight that shopkeepers across Nigeria use oil lamps to keep their businesses going after dusk. (AP)

Nigeria’s electricity debacle

Nigeria’s more than 200 million inhabitants are supplied with only 4,996 MW of electricity and only 52 percent of the population have access to the national electricity grid. The rest are not receiving electricity in any shape or form. The constant power supply has been the holy grail of every administration for decades.

In 2013, former President Goodluck Jonathan allegedly privatized the power sector to end decades of relative darkness, but the sector has only gotten worse in the hands of private investors. A clear sign is the constant national network breakdown, which failed three times in May alone and a total of 29 times in the last three years.

“If you look at the historical nature of electricity and gasoline management in Nigeria, you will find that both were administered largely as public goods rather than commodities, the prices of which should largely be determined by market forces,” Ikemesit Effiong, Head of Research at SBM Intelligence said TRT world.

“And because we never managed these things as market goods, but as social goods, there was considerable underinvestment in electricity … across all pillars – generation, transmission and distribution and especially consumption.”

The electricity tariff was raised five times between 2015 and 2021 under the current administration. The last – a 50 percent increase – was announced five days after 2021, at a time when Nigeria was still actively affected by the economic fallout from the coronavirus pandemic, which led to an skyrocketing inflation rate that is now standing at 18.2 percent.

The National Electricity Regulatory Commission (NERC) refuted the report of an increase saying that prices “have been adjusted from NGN 2.00 to NGN 4.00 per kWh to reflect the partial effects of inflation and exchange rate movements”.

The January hike was eventually suspended due to threats from the National Labor Congress and popular outcry, but is now back on track to be implemented in July.

People have been seething with rage across Nigeria since the government allowed gas and electricity prices to rise.  The country saw several protests over the past year.

People have been seething with rage across Nigeria since the government allowed gas and electricity prices to rise. The country saw several protests in the past year. (AP)

The continuous migration affects the ease of doing business in the country. The World Bank’s Doing Business Ranking lays Nigeria 131st in the world. But the burden has become almost unbearable for small businesses.

Small and medium-sized enterprises (SMEs) account for up to “ 96 percent of businesses and 84 percent of employment ” in the country, and a significant portion of them depend on electricity to function. ‘I could see that easily [hike in electricity tariff] Elimination of Small Businesses … that have electricity as their essential input. I would argue that this is already happening, they are life sustaining, or are about to be life sustaining. Unless this is addressed in conjunction with other adverse economic conditions in Nigeria, many companies will go under as it does not make sense from a profit standpoint. It has reached emergency levels, ” Ikemesit said.

” A retrograde situation ”

Olomu, a primary school teacher and mother of three children in Ilorin, sells groceries at a barren kiosk in Tanke – loaves of bread, sachets of water and soft drinks. The business is supposed to complement her meager teacher salary.

Like most Nigerians, she doesn’t have a meter, so she gets her bills at intervals. As of 2019, only 43 Percent of Nigeria’s electricity consumers had access to meters. Most of the time, consumers would team up to use a meter and if, as in the case of Olomu, there is no meter at all, the tariff is calculated at the discretion of the distributor. Olomu said she pays an average of 5000 naira a month for “darkness”.

To make up for the lack of electricity, she is looking for an alternative by buying blocks of ice to freeze her goods. That costs them 500 naira (1.2) a day, which corresponds to almost 15,000 naira (36.4) per month. That alternative is almost as much as it is making in profit, she said.

As at the time of the conversation with TRT World, the sales company operating in its area had been supplying the low voltage for several days due to rainfall. The voltage supplied is not sufficient to supply your refrigerator with electricity. “And yet we get an invoice at the end of the month,” she joked. “How many bags of water will you sell in a day to make a profit, where 5000 naira ($ 12.1) can be set aside for electricity?”

Abiola sees no end in sight. She has become skeptical of positive change as her years as a trader in her industry have taught her to constantly adapt to the whims of the power sector, which increases the cost of running her business and makes it harder to make ends meet.

“We have no choice but to simply cope with a situation we are not happy with; We have nothing to do with it, ”she said.

Ikemesit’s assessment of the electricity sector is grim. This is not good news for small and medium business owners like Abiola and Olomu. “The energy sector is in such bad shape that we will need significant investments for several years with no actual tangible results before we get to the point where transmission and distribution begin to gain weight,” he said .

Those several years would mean Abiola, Olomu, and millions of business owners like them would continue to battle an underdeveloped energy sector that shows no promising signs of improvement.

” It was a bearish situation for the business. Sometimes we have to take our eyes off the issues. If you had to live on electricity alone, this business would no longer exist, ” said Abiola.

Source: TRT World



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