Economy heads for collapse as Nigerians pay N876.6b for darkness

Posted by Timige, On 17 Jun, 2022 | Updated On 22 Jun, 2022 No Comments »

Power-Outage in Nigeria
More manufacturers, SMEs shutting down over worsening electricity, N820/litre diesel, Haulage of food items, cooking gas soar, Stakeholders raise fresh concerns over nation’s energy insecurity

Stakeholders are in panic mode over the fate of the nation’s economy, stemming from a sustained energy crisis that has lasted seven years.

Nigeria, according to stakeholders, now has to face worsening situation that will escalate existing high cost of living and goods.

There are also indications that the energy crisis will further increase unemployment as well as borrowing as the N5.5 trillion projected revenue in the 2022 budget remains elusive over productivity challenges in the manufacturing and service sector.

Already, the country is spending over 90 per cent of its earnings from the oil sector on petrol subsidy, and with the energy crisis, experts project tougher times for state governments as the country prepares for the 2023 general election.

While Nigerians are to pay about N876.6 billion on electricity bills in the last lap of President Muhammadu Buhari’s administration, a development seen by consumer advocates as payment for darkness, manufacturers and small and medium scale entrepreneurs told The Guardian, yesterday, that more businesses are rapidly shutting down, leading to unemployment crisis.

In what is the worst energy crisis for a country that has depended on fuel importation despite being the leading crude oil producers in Africa, stakeholders envisage total collapse of the economy, insisting that increasing cost of aviation fuel, diesel, Liquefied Petroleum Gas (LPG), as well as wobbling electricity supply will compound the foreign exchange challenges to cripple economic growth for businesses and standard of living for citizens.

There are fears that companies may be forced to downsize. To compound the high cost of food items and other products in the market, Nigerian Association of Road Transport Owners (NARTO) told The Guardian, yesterday, that the cost of lifting farm produce and other goods across the country is now drastically adjusted and may further increase high operational expenses due to energy crisis.

NARTO National President, Yusuf Lawal Othman, who said though 25 per cent freight rate has been approved and implemented by the Federal Government for lifting of Premium Motor Spirit (PMS), insisted that cost of lifting other petroleum products as well as farm produce is regularly worked out o reflect market realities.

Othman said the haulage companies use diesel mainly and have no option than to adjust cost of transporting goods across the country.

RECALL that most parts of the country have been in total darkness as the national grid collapsed again for the 17th time this year on Sunday evening after over 130 similar collapses in the last eight years. Furthermore, diesel, which has been the major energy source for manufacturers and corporate businesses, yesterday, sold above N800 per litre in most parts of the country, which marketers say may hit N1,500 in the next two weeks.

Coming at a time that the country is implementing increase in electricity tariff for end-users every six months, with another increase due next month under the Service Based Tariff (SBT), statistics from NBET showed that monthly electricity bill in the country would hover around N72.3 billion. This will bring the yearly payment to about N876.6 billion.

Nigeria’s only electricity grid operated by the Transmission Company of Nigeria (TCN) from Osogbo collapsed at 6:49p.m. on Sunday. Like it was since the beginning of this year, the grid remained weak, yesterday, with generation capacity standing at about 2,500 megawatts.

These electricity challenges have been in place before the Federal Government decided, in 2013, to hands off and allow private investors to revamp the sector. The Goodluck Jonathan government had in 2013 privatised the sector for $2.5 billion, which saw the distribution and generation segment divided into 17 companies – six GenCos and 11 DisCos.

But years after the privatisation, the sector did not only fail to improve, it increased the burden of billing on consumers, who are equally shortchanged with estimated billing.
THE Association of Nigerian Electricity Distributors (ANED), umbrella body of DisCos, has decried repeated system collapse, blaming the situation on the obsolete analogue system being used by TCN.

Director of Research and Advocacy at ANED, Sunday Oduntan, noted that lack of standard power protection equipment across transmission substations remained the major cause of the collapse.

Also, Dr Joy Ogaji, Executive Secretary of the Association of Power Generation Companies (APGC), decried the impact of the collapse on power infrastructure and the chaos it creates in the form of monetary setbacks for activities in hospitals, airports and other public institutions.

“The GenCos in signing the contracts for their machines also signed the number of times their machines will make stops, which is an average of 20 stops in a year, as recognised by the Multi-Year Tariff Order and Nigerian Bulk Electricity Trading Company (NBET). Unfortunately, due to the current system collapse, ramp up and ramp down instructions of the System Operator, the machines make over 365 stops in a year with sometimes more than one stop in a day,” Ogaji said.

With borrowing rate at about 20 per cent and unemployment rate already heading towards 40 per cent, President, Manufacturers Association of Nigeria (MAN), Mansur Ahmed, said the prevailing energy crisis is already exacerbating low productivity, unemployment and poor contribution to Gross Domestic Product (GDP).

“You should already be aware that manufacturers have reduced production significantly. The cost of production is significantly going up. The energy crisis has worsened existing challenges. The cost of borrowing has been too high for the manufacturing sector. There is nowhere in the world where manufacturers are experiencing interest rates of over 20 per cent. It is not competitive; and secondly, as I said, a lot of members are dependent on import materials.

“So, the increase in price of the dollar and its lack of availability also constitute huge challenges for the sector. We’re going to continue to see a decline in input and output. We’re going to see possible shutdowns and we’re certainly going to see possible reduction in employment,” he said.

Ahmed added that from the electricity industry as well as the supply of petroleum products, especially diesel, the Federal Government must do something urgently to address the current situation.

According to him, while the cost will be passed to consumers, prevailing development has weakened purchasing power and creates demand problem for the sector.

Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, decrying the cost of the failing country’s energy sector, noted that the burden on the citizen and businesses would spell doom for the economy.

“In a situation where you’re having frequent system collapse and the fall back is diesel or gas, and the costs of those products are unbearable, businesses would have to scale down their operations, many are operating and not making profits, just to keep the system going and generate cash flow, it’s a very worrisome situation,” he said.

He asked government to cut off all the tax components of the products and properly check the monopolistic nature of the deregulated products to save the economy and hardship on the masses.

Although the Ukraine-Russian war, which crossed the 123-day mark yesterday, had triggered energy prices across the world, the lack of refining capacity in the country, according to Yusuf, has further worsened Nigeria’s plight.

Besides this, the CPPE boss said “there are other domestic variables; there are some monopolistic elements in the supply of diesel, that’s why the situation is this bad. On the part of citizens, they’re feeling the heat daily. A 12kg of LPG is now over N12,000, people are going back to firewood and coal as the implications on household budgets are serious.”

Executive Secretary at Nigerian Association of Small & Medium Enterprises (NASME), Eke Ubiji, told The Guardian that the sector, which is expected to back up the economy, is suffocating from electricity and diesel challenges.

“Our people are closing down daily. The cost of energy is unbearable for small businesses. Not just this, the cost of everything is too high. The cost of operation is skyrocketing. Our association is very concerned.

“No one can survive. As you can see, the economy is currently on standstill. Sadly, we have been talking and engaging government but nothing has changed, as all attention seems to be shifted to politics,” Ubiji lamented.

He asked government to review the power sector and bring in new investors by way of creating new DisCos and GenCos, adding that alternatives like solar may provide some succour for businesses, especially SMEs, to thrive.

PricewaterhouseCoopers’s Associate Director, Energy, Utilities, and Resources, Habeeb Jaiyeola, who linked the issue to the balance of power demanded by the DisCos and power generated by the GenCos, said billions of naira was being lost anytime the system collapsed.

According to him, the fact that Nigeria had excess generating capabilities over current off-take by DisCos requires several ramp-down by GenCos to prevent excess supply to the grid.

Jaiyeola, however, noted that the prevailing energy crisis is global and Nigerians must go back to the drawing board in planning for energy security.

To avoid grid collapse, he noted that the situation requires very strict monitoring as absence of such could lead to the collapse of the grid, adding that equipment failure due to obsolescence or maintenance gaps could equally lead to collapse.

Jaiyeola noted that the economic impact of the situation remained quite high, considering that the power supply had remained perpetually epileptic.

Do you have question or opinion about this post? Make it in the comment below.

Please Share with Your Friends/Followers

Get Current with Nigeria, Subscribe Now!

We'll never share your email with anyone else.

Leave a Reply

Your email address will not be published. Required fields are marked *

Comment moderation is enabled. Your comment may take some time to appear.