How To Solve Nigeria's Electricity Problems And Build Businesses

How To Solve Nigeria’s Electricity Problems And Build Businesses | Image Source: Pixabay

Nigeria’s multi-decade long electricity problems have worsened in recent years. This nightmare is further pronounced by corrupt and mismanaged energy practices and policies, causing the country to have had about 8 energy ministers in a 5 year time-span, and not even emphasising the fact that the country has spent over $20 billion dollars in the last 21 years in an attempt to provide a lasting solution to its power challenges.

Electricity is key to the development of nations, as industries, small businesses, and government institutions rely on it for sustainable growth and development. When growth is facilitated by the placement of the reliable energy backbone the country’s capitalists need to build their businesses, economic growth is guaranteed, as capital, labour, and energy goes hand in hand to drive production, which inherently builds economies since local organisations would be working at their full operating capacities.

The poor electricity supply in Nigeria coupled with the high costs and constant scarcity of diesel and gasoline has driven up the costs of production, causing businesses to understaff their organisations and contributing to the build-up in the volume of jobs lost in the nation. It also creates uncertainty in the future of most businesses because poor access to electricity leads to high costs of production, and this leads to higher-priced final goods, which the market may react positively or negatively to upon presentation. It goes on to affect the growth of global trade, as international organisations expect to buy certain items at certain prices and wouldn’t want to spend far more money on what’s coming out of Nigeria because of the country’s electricity problems. For this, they go elsewhere to purchase, and so, our export capacity drops, causing most organisations to only focus on exporting the base materials mined, rather than building facilities that could process it to the next level and provide millions of jobs to more Nigerians in the process.

But then again, Nigeria is not the only country affected by the electricity drought, as about 622 million Africans are estimated to be living with no access to electricity. When further analysed, Sub-Saharan Africa, which is where Nigeria belongs to, has about 32% access to electricity, while North Africa has a 99% access to electricity, proving that they have better energy policies, and so, more leverage to sway investors who have interests on making investments in Africa.

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See Also: Why African Nations Are Poor, And Others Are Wealthy

 

But Where Exactly Is Nigeria Right Now With Power Generation?

Based on a World Bank report, the per capita consumption of electricity in Nigeria is 142 kWh. This is quite saddening as the average per capita consumption of electricity in China as at 1971 was 151.98 kWh, which is higher than where Nigeria is 47 years later. In 2013, China’s per capita consumption of electricity sat at 3,762.08 kWh, with 2018’s estimate expected to be far higher. No wonder the country comfortable sits at the number 2 spot with the second highest GDP in the world and is a haven for the facilitation and growth of the global trade industry.

While Nigeria’s average electricity consumption per head is 142 kWh, the generation capacity of the national grid is around the region of 12,522 Mega Watts against South Africa’s over 50,000 Mega Watts, but about 4,000 MW and less is what is widely distributed to the whole nation which is in an energy crisis and is desperately looking for a saviour to solve its energy needs for its over 190 million people.

 

But Didn’t The Country Try To Fix The Electricity Problem By Privatising The Sector? If Yes, What Then Is The Core Reason We’re Still In An Energy Apocalypse?

In 2015, a privatisation approach was introduced by the Federal Government of Nigeria on the expectation that the distribution companies (Discos), the generating companies (Gencos), and the Transmission Company of Nigeria (TCN) would be fully privatised, but what most Nigerians don’t know is that’s not the case.

The generating companies were privatised, and most of them fully own their own assets. The distribution companies were partially privatised with the government still retaining ownership of 49% of the assets, and the Transmission Companies still remained owned by the government but with its management contracted out.

But now the problem is while fully privatised, the generation companies cannot work at full capacity because the transmission companies which is still owned by the federal government cannot transmit more than a certain amount of power, meaning that if the generating companies (privately owned) generated 10,000 MW of electricity and the transmission companies (government owned) cannot transmit it to the distribution companies (partially privately owned), the real power that the country could work with would be impossible to achieve.

Another problem is when the distribution companies were privatised, the electricity tariffs were increased before the privatisation occurred. Then right after investors had poured in money to become key players, the court reverted the prices and they suddenly operated at a loss with the tariffs being pegged at below market price.

Analysts could argue that the government tricked investors, but then again, no one who committed to the privatisation practice on the distribution end would be willing to sacrifice any extra penny in the form of investment to the Nigerian government. It simply showed the system is completely untrustworthy.

Since distribution companies are now operating at a loss, it only makes sense that the distribution of pre-paid meters too would suddenly stop with an endless excuse, so that the distribution companies can use estimated billing to cover for their losses whether a household used electricity in a month or not.

See Also: How To Make A Country Rich With the Right Trade Policy

 

So What Can Be Done To Fix The Electricity Problem?

1). I suggest a full privatisation of the full structures, with the government acting simply as the regulator.

When investors can control a critical part of the energy sector, which is the transmission end, we can be better safe to know that investments can come in to build transmission capacities of over 10,000 MW in a short period of time. Also, the transmission shouldn’t be limited to a certain group of people but should be an open bidding system for any company with a great track record in the global energy industry. This way, the generating companies can also be given the opportunity to generate and transmit by themselves.

The critical role the federal government should then play is regulating the industry to ensure consumers get great quality services and are not over-priced. It would work more like the telecommunications industry with the government being the primary body ensuring everyone is fulfilling their obligations in the fairest possible ways for the consumers.

2). There should be special incentives by the government to enable people to get affordable access to renewable energy in the form of solar panels and their counterparts. In the western world, companies like SolarCity sells solar panels to homes with a 25-year repayment plan, and the panels sold have the capacity to carry every appliance in the various homes they are used in.

When acquisition programs like this are made available based on key requirements that ensure it’s only reliable people that can actually be a part of it, the burden on the national grid can be reduced. And just as excess generated solar power is contributed back to the national grid in western countries, people who are a part of the program would have the excess generated energy contributed to the grid.

See Also: How To Diversify The Nigerian Economy Successfully For Growth

 

To Sum It Up

While these may not be a lasting solution to the present problems the Nigerian energy sector faces, it would take us through leaps and bounds and provide between 18 to 20 hours of guaranteed electricity daily for people, businesses, and much more living in the country, and in the process, would drive growth and development for Nigeria.

God bless Nigeria!

 

About The Article

This is an opinion and analysis posted by Stan Edom, a Nigerian citizen and Editor In Chief of Startuptipsdaily.com.

The Opinion and Analysis section is committed to nation building efforts through empowering expert writers to air their views on the best ways to solve national issues and move nations forward.

Opinions and Analysis will be published every Friday.

If you’ll like to submit opinions and analysis like this to startuptipsdaily.com, please read the guidelines listed here.

 

What are your thoughts on how to improve Nigeria’s electricity supply problem and drive the growth of businesses? Let me know by leaving a comment below.

 

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