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Reversing the recent increases in Nigeria’s electricity tariff structure is not enough ~ NLC

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The Nigeria Labour Congress received with great concern and apprehension a press statement credited to the Honourable Minister of Power, Engineer Saleh Mamman in which he debunked the recent increase in the cost of electricity by the Nigeria Electricity Regulatory Commission as untrue. If the intention of the Honourable Minister is to allay the fears of ordinary Nigerians that we would not start the New Year on the pedestal of intensified hardship, then the contradictions in his statement only succeeded in reinforcing the anxiety by Nigerians that we yet again face a year where the biggest pre-occupation of government appears to be the deflection of the worst economic vicissitudes on citizens.

In one breath, the Honourable Minister debunked any increase in electricity tariff especially for Nigerians who are grouped under Band D and E tariff structure. In the same statement, the Honourable Minister admitted that there have been adjustments in what customers across the five bands pay. He attributed this increase to minor adjustments owing to current inflation levels and forex realities. The import of statements like this is that they do not only confuse citizens but also confound them on the genuineness of government intentions and actions. The chief casualties in situations like this is public trust and confidence in government.

The events of the past three months have severely tested the confidence of Labour in the ability of government to negotiate in good faith and keep to its promises. We wish to set the records straight that the decisions taken by government since our negotiation in September 2020 in tinkering with the electricity tariff is anomalous with the spirit and letters of our agreement.

The understanding we had with government was to suspend further increases in electricity tariff until the committee set up by government and labour are able to iron out the incongruities in Nigeria’s electricity sector. Contrary to what the Honourable Minister projects to the public, the truth is that while the committee was yet to conclude its assignment, government unilaterally hiked electricity tariff. This is most unfortunate and totally unacceptable.
In the new tariff structure as has been advertised by many of the DISCOs, the price adjustment was not minor as some of the increases were up to 60% to 100% across all the bands. The excuse of reflecting or rather transferring the volatilities in foreign exchange and loading the current rate of inflation on workers and other consumers already badly buffeted by the downturn in the economy signals an attitude of insensitivity by government. Unfortunately, even the poorest of the poor in Band D and E, by the admission of the Minister, were not spared of this new burden.

From the feedback we have so far gotten from our representatives in the Technical Committee on the Review of the Electricity Sector, four things stand out in the state of affairs in the electricity sector. First is the unsustainability of using international economic indices to determine domestic electricity tariff. Something is inherently wrong in calculating in United States dollars the cost of the gas used by GENCOs in generating electricity in Nigeria. The current practice violates fundamental economic theory of comparative advantage especially for a developing economy as ours. Related to this is the calculation of ancillary electricity supply logistics in foreign currencies and transferring same to electricity consumers.

Second is the perversity of offloading the cost of electricity capital accumulation on end consumers. It is tenuous and economically unreasonable for electricity generation and distribution companies to upload the cost of acquiring their equipment and operational facilities to electricity consumers. This has occurred at two distinct levels so far. The bailout fund to DISCOs from public coffers was one instance. The other instance is the inbuilding of equipment importation cost into what consumers are paying. The Honourable Minister conceded this much when he talked about minor adjustment in light of foreign exchange realities.

In other capitalist climes, investors procure their working capital from profits accruing from their investments not from uploading and transferring the cost of capital acquisition directly to consumers. If the Nigeria Electricity Regulatory Commission (NERC) continues to use this strange template to design and review its tariff template, then there would be no end to continuous increases in what Nigerians pay for electricity. Amidst the current electricity tariff volatilities, the situation of the average consumer would be worsened by the current reliance on alternative sources of energy owing to prevailing instability in public power supply.

Third is the opacity in the predisposition of the Nigeria Electricity Regulatory Commission (NERC). The feelers from many stakeholders in the electricity supply chain suggest that the regulator in the sector pulls more on the side of the DISCOs and GENCOs rather than on the side of consumers of electricity both industrial and private users. The lack of representation of critical mass of electricity consumers in NERC has aggravated this concern.

From the foregoing, there is no gainsaying the fact of acute adversity imposed by the Power Sector Reform on ordinary Nigerians and the manufacturing sector. This reinforces our earlier calls for a holistic review of the entire power sector privatization program as it has clearly failed to achieve the economic goals set forth in Chapter Two of Nigeria’s Constitution especially with regards to protecting the economic welfare of citizens and in violating the Constitutional expectations that the commanding heights of the Nigerian economy should be managed by the State.

While we wait for the Technical Committee on Review of Nigeria’s Electricity Sector to conclude its work, the Nigeria Labour Congress calls on government to go beyond the reversal of the recent tariff increases to adorn the robe of gentlemen negotiators. We demand that all commitments made by government to Organized Labour during our recent negotiations be respected. We also demand a cessation to unilateral actions that only undermine the spirit of social dialogue and erode the confidence of Nigerians on the intentions of government. Our return to the negotiation table will be premised on firm assurances and commitment by government that future negotiations will be done in utmost good faith.

 

Comrade Ayuba Wabba, mni
President
8th January 2021

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