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World Bank wants 30% increase in electricity tariff in Nigeria
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The recent increase in electricity tariff by the Federal Government may have been done with the backing of the World Bank, which is suggesting a 30 percent increase from the current amount charged.
According to an article in Bretton Woods Project website, the Nigerian Electricity Regulatory Commission (NERC) has the legal power to put in place life line tariffs and to discriminate in favour of essential services such as hospitals.
Yet questions remain over its political strength. In August 2007 the commission called on the government to provide subsidies, without which electricity would be unaffordable for millions of Nigerians. However the Bank stated that in order to achieve full cost recovery with an adequate profit margin, the “reasonable average tariff” should be about 30 percent higher than the one currently in operation. This contradicts the Bank’s own Joint Staff Advisory Note on the progress report for NEEDS, of June 2007 which states “it will be important to establish electricity tariffs which allow cost recovery, while introducing adequate measures to protect vulnerable groups”.
The minority of Nigerians connected to the electric grid suffer from frequent and unpredictable black outs. Many parts of the country go for days without access. Power is often rationed, meaning that communities receive electricity only on alternate days, and rarely for the full day when they do. Bills are generally issued on the basis of arbitrary estimates, often charging consumers for much more than they have consumed. Mass disconnections of entire communities are common, on the grounds that some households in the area have been facilitating illegal tapping or refusing to pay their bill. This obliges all those affected to either pay a hefty bribe and/or reconnection fee. Often out of desperation to access a supply of energy that many simply can not afford, illegal tapping, vandalisation of power lines and non-payment of bills is common. Power outages across the country have had a dire impact on essential services such as hospitals and schools as well as small businesses. Those who can afford to rely on generators, which are cumbersome and extremely expensive to run.
Rural electricity access in Nigeria is less than 20 percent. Most rural populations are off-grid and almost wholly reliant on wood fuel for domestic needs. Wood is usually collected by women who walk up to eight hours per day to find it. Nearly two-thirds of Nigeria’s energy consumption is from traditional burning of fuel wood and agricultural wastes. Any rural electrification that does exist tends to be thanks to diesel generators10. However diesel fuel must often be carried over long distances, through unpaved roads, which is difficult during the rainy season.
According to the Bank, in a country with over 130 million people, Nigeria’s electricity utility company has only 4.6 million customers. One connection is shared by numerous customers.
In 2005 technical losses in the transmission and distribution system were as high as 40 percent.
A large part of the transmission system suffers from extensive vandalism and inadequate maintenance. Power generation facilities are in poor shape whilst distribution networks are poorly maintained and inefficiently operated, hence the difficulty in moving power from generation to consumption points. Statistics on electricity access, and grid capacity and output vary but the second NEEDS report cites installed generation capacity at 6,000 MW, but with available energy output at only 3,000 MW, less than 30 percent of the demand, currently estimated to be at 10,000 MW.
Nigeria’s epileptic energy supply is one of the key factors hampering its development. In 2005 the Bank estimated that to increase access to 75 percent would require over $10 billion in investments.
Under the tutelage of the IFIs a major neo-liberal economic reform programme was undertaken by former president Olusegun Obasanjo during his 1999-2007 administration, which found him heavily in favour with Washington.
Though he promised to reform the energy sector, investments of up to $16 billion made by the federal government during his eight years in office did not lead to any tangible improvement. In March 2008 this expenditure was the subject of a corruption investigation by the House of Representatives. Former finance minister, Ngozi Okonjo-Iweala, now managing director of the World Bank, and former minister of solid minerals Oby Ezekwesili, currently African vice president of the World Bank, appeared before the investigative panel. Both played crucial roles in power sector reform during Obasanjo’s administration. The committee is expected to submit its findings to the house in April 2008.
According to an article in Bretton Woods Project website, the Nigerian Electricity Regulatory Commission (NERC) has the legal power to put in place life line tariffs and to discriminate in favour of essential services such as hospitals.
Yet questions remain over its political strength. In August 2007 the commission called on the government to provide subsidies, without which electricity would be unaffordable for millions of Nigerians. However the Bank stated that in order to achieve full cost recovery with an adequate profit margin, the “reasonable average tariff” should be about 30 percent higher than the one currently in operation. This contradicts the Bank’s own Joint Staff Advisory Note on the progress report for NEEDS, of June 2007 which states “it will be important to establish electricity tariffs which allow cost recovery, while introducing adequate measures to protect vulnerable groups”.
The minority of Nigerians connected to the electric grid suffer from frequent and unpredictable black outs. Many parts of the country go for days without access. Power is often rationed, meaning that communities receive electricity only on alternate days, and rarely for the full day when they do. Bills are generally issued on the basis of arbitrary estimates, often charging consumers for much more than they have consumed. Mass disconnections of entire communities are common, on the grounds that some households in the area have been facilitating illegal tapping or refusing to pay their bill. This obliges all those affected to either pay a hefty bribe and/or reconnection fee. Often out of desperation to access a supply of energy that many simply can not afford, illegal tapping, vandalisation of power lines and non-payment of bills is common. Power outages across the country have had a dire impact on essential services such as hospitals and schools as well as small businesses. Those who can afford to rely on generators, which are cumbersome and extremely expensive to run.
Rural electricity access in Nigeria is less than 20 percent. Most rural populations are off-grid and almost wholly reliant on wood fuel for domestic needs. Wood is usually collected by women who walk up to eight hours per day to find it. Nearly two-thirds of Nigeria’s energy consumption is from traditional burning of fuel wood and agricultural wastes. Any rural electrification that does exist tends to be thanks to diesel generators10. However diesel fuel must often be carried over long distances, through unpaved roads, which is difficult during the rainy season.
According to the Bank, in a country with over 130 million people, Nigeria’s electricity utility company has only 4.6 million customers. One connection is shared by numerous customers.
In 2005 technical losses in the transmission and distribution system were as high as 40 percent.
A large part of the transmission system suffers from extensive vandalism and inadequate maintenance. Power generation facilities are in poor shape whilst distribution networks are poorly maintained and inefficiently operated, hence the difficulty in moving power from generation to consumption points. Statistics on electricity access, and grid capacity and output vary but the second NEEDS report cites installed generation capacity at 6,000 MW, but with available energy output at only 3,000 MW, less than 30 percent of the demand, currently estimated to be at 10,000 MW.
Nigeria’s epileptic energy supply is one of the key factors hampering its development. In 2005 the Bank estimated that to increase access to 75 percent would require over $10 billion in investments.
Under the tutelage of the IFIs a major neo-liberal economic reform programme was undertaken by former president Olusegun Obasanjo during his 1999-2007 administration, which found him heavily in favour with Washington.
Though he promised to reform the energy sector, investments of up to $16 billion made by the federal government during his eight years in office did not lead to any tangible improvement. In March 2008 this expenditure was the subject of a corruption investigation by the House of Representatives. Former finance minister, Ngozi Okonjo-Iweala, now managing director of the World Bank, and former minister of solid minerals Oby Ezekwesili, currently African vice president of the World Bank, appeared before the investigative panel. Both played crucial roles in power sector reform during Obasanjo’s administration. The committee is expected to submit its findings to the house in April 2008.
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