Foundation for Environmental Rights, Advocacy and Development, FENRAD, a pro-democracy and environmental rights-focused civil society group in Abia State, having followed all the debates for and against, including the reasons adduced for subsidy removal on electricity or energy tariff, wishes to draw the attention of the government and Nigerian public to some of its views on the recently announced electricity tariff hike for consumers in a tariff class known as ‘Band A.’
First off, FENRAD does not think it is ideally suitable at all times, at least in the Nigerian context, for the federal government to vigorously pursue and implement guidelines from the IMF, the World Bank, international rating agencies or even foreign think tanks. It is not because the Foundation believes that in a competitive and cooperative globalising world such as ours, Nigeria can go it alone or exist in autarky, but that certain economic peculiarities and realities relative to Nigeria may at some point dictate otherwise. This is the case with the federal government today implementing an IMF report by removing energy subsidy to address poverty and inequality; the same poverty for which social safety net programmes and conditional cash transfers had been instituted and flawed.
FENRAD believes that it is not ideal to remove energy subsidy in the present circumstances because, following fuel subsidy removal, which took a huge toll on the national economy, accompanied by foreign exchange market windows unification, many businesses are barely recovering even as some are still under. So why now? The exercise, no matter the amount it allows the federal government to save up, is not timeous or pro-people because there is no recovery yet from a previous similar exercise. More so, from Band A consumers we may eventually get to Band E, the least tariff class in the energy sector banding, as one particular tariff class alone cannot sustain the full weight of subsidy removal on national consumption. Again, this may negatively impact productivity as prices of goods may likely increase due to tariff hike thereby increasing the existing inflationary pressure.
It is largely unsustainable, as it is equally unsupportable, for electricity consumers in a country where total national grid collapse is still the order of the day to pay about 240% of what they currently pay because the federal government is implementing an IMF report. Ordinarily, one would have thought that the World Bank’s structural adjustment of the mid ’80s was enough as a lesson. We are aware that across bands, it is hard to say which Nigerian tariff class enjoys a 20-hour energy supply, even among the so-called Band A consumers. Uninterruptible power supply, as we all know it, is still an achievable goal under the Renewed Hope agenda, even though yet to be achieved as of yet, so what changed?
It is indeed true that the federal government pays a huge sum ($2.6bn) in energy subsidy, and that the Discos are in most cases unable to maintain a financial balance due to Aggregate Technical Commercial and Collection Losses and fluctuations in gas price given external shocks and volatilities like the ongoing war in Ukraine, FENRAD believes the situation could have been better managed if the federal government then had ensured that all billable Nigerian homes, companies and businesses were metered with both commercial and technical losses addressed before the unbundling of the energy sector a little over a decade ago. The challenge today partly stems from the inability of the Discos – some of whom are still servicing debt used in asset acquisition – to deploy cutting-edge technology to the sector amid infrastructure decay. Sadly, some facilities inherited by Discos are either obsolete or outdated, therefore needing evacuation or a total overhaul. This has thrown open the argument whether the government should reacquire some of the assets as private owners had not managed them better.
FENRAD calls on Discos to work on mass metering, in line with the mass metering initiative of the federal government, so as to minimise commercial losses. It is sad that this policy is coming at a time when only about 44% of Nigerian homes and businesses are metered (12.6 million). Ghana, for example, has achieved a better feat, as do Gambia and Zimbabwe, including India with a well over 90% metering project achieved so far. Also should the government help in exploration of other sectors including alternative energy sources like solar, wind and the like. It is regrettable that a country sitting on top of 206 trillion cubic feet (tcf) of proven natural gas deposit can only generate 12,000 MW and supply only 3,500 of its generation capacity for a population of over 200 million.
Already, household finances are shrinking, with food crisis and inflation not letting up, as a result of removal of subsidy on fuel and the foreign exchange windows unification. Removal of electricity subsidy may likely worsen the economy which is already in a parlous state. Again, given that we are yet to see the government fulfill all the promises made during the post-fuel subsidy era, ranging from importation of CNG vehicles, triggering the refineries to come on stream, jump-starting the economy through palliative support to private businesses, there is little hope that the government can address the challenges attendant to this policy. Has the government thought this through? Has the federal executive council, the national economic council, the thirty-six state governors, the organised labour and other trade unions all been consulted?
Removal of subsidy may augur well as a plan, perhaps in the long run, but combating hunger and preventing possible hardships in the intervening period is the real challenge, because removal of subsidy on energy, if it happens across bands, may occasion a need for palliative, especially amongst small-scale businesses with middle- and low-income families likely to plunge deeper into poverty. How many more Nigerians need to die before the rays of the Renewed Hope are seen? Government and investors must harmonise the energy sector by ensuring mass metering, addressing the problem of infrastructure decay, deploying modern technology, before any talk of subsidy removal. Removing subsidy without first critically reforming the sector is like building something on nothing.
These are not the times.
Signed:
Comrade Nelson Nnanna Nwafor
Executive Director
Foundation for Environmental Rights, Advocacy & Development (FENRAD Nigeria
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