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Confusion over planned N104b free electricity for Nigerians

By Kingsley Jeremiah, Abuja
13 April 2020   |   4:30 am
A Bill announced by the Speaker of the House of Representatives, Femi Gbajabiamila, with the intent of waiving the payment of electricity bill worth N104 billion for consumers for two months has become a source of confusion among stakeholders in the power sector.

• DisCos back move, GenCos yet to decide
• 90% Nigerians may miss out in the scheme

A Bill announced by the Speaker of the House of Representatives, Femi Gbajabiamila, with the intent of waiving the payment of electricity bill worth N104 billion for consumers for two months has become a source of confusion among stakeholders in the power sector.

Though the Electricity Distribution Companies (DisCos) have expressed backing for the move to mitigate hardship caused by coronavirus (COVID-19) for consumers, the generation companies told The Guardian that the option was being weighed.

Gbajabiamila’s proposal that the payment of electricity bill be waived is being seen as thoughtless, considering the fact that the power sector is already privatised and currently on the verge of being thrown into insolvency.

The stakeholders insistedthat the proposal, coming at a time when the Federal Government is facing financial crisis and has already approached the National Assembly to approve N500 billion for COVID-19 intervention in the face of revenue shortfall, indicated that the lawmakers lacked knowledge of the power sector and the prevailing situation in the country.

In January this year, the invoice for the energy consumed by Nigerians stood at N52 billion going by the statistics published by the Nigerian Bulk Electricity Trading Plc (NBET), meaning that the Federal Government may have to pay N104 billion to the Nigerian Electricity Supply Market (NESI), which consists mainly private investors.

The Association of Nigerian Electricity Distributors (ANED) had earlier said the Federal Government’s indebtedness to the power distribution companies (DisCos) in terms of tariff shortfall was N1.728 trillion as at December 31, 2019.

The power generation companies (GenCos) had also said based on a power purchase agreement, the Federal Government had in the past five years owed the companies N1.2 trillion for stranded electricity standing at about 21,184.62 megawatts of electricity to end users.

Executive Director (Research and Advocacy), Association of Nigerian Electricity Distributors, Sunday Oduntan, said: “We align with the efforts of the National Assembly and the federal executive to mitigate the hardship being borne by our customers and other citizens all over the country.

“We also completely align with the plans for palliative measures, including free electricity supply to all Nigerians for two months, to make life easier during the lockdown period. Details of implementation to come soon.”

But the Executive Secretary, Association of Power Generation Companies (APGC), Joy Ogaji, sounded uncertain about the workability of the plan. Part of the APGC concern is where the needed finance to generate the electricity that would be distributed freely would come from since the power companies would have to pay for services and products, including gas.

“There is a number of issues to be considered. For us to have free power, the gas suppliers have to be engaged. Would they give the GenCos free gas? Apart from free gas, they have O & M cost and other obligations before power is generated.

“We have not been engaged by the government. But I believe that they are in the process of engaging us. When we know the full details then we will be able to respond,” Ogaji said.

At a meeting between the National Assembly leadership and the Minister of Finance, Zainab Ahmad and the Director-General of the Budget Office of the Federation, Ben Akabueze, Gbajabiamila said the proposal was necessary because electricity was a commodity consumed by every household and as such it would have greater effect on the people.

“The minister did say that she had been inundated by the public, just as we are, on several suggestions and ideas and I am almost a hundred percent sure that from those ideas will be the issue of some kind of shelter, as far as electricity is concerned.

“It is one thing that will touch every household. As I said earlier, when we engaged, I discussed with the electricity Distribution Companies (DisCos) that they should package whatever they would require, if the government can give them, for us to allow for two months free electricity for Nigerians.
Currently, the Federal Government is struggling to finance the 2020 budget as revenue shrinks and deficit widens in the face of collapsed oil price and economic activities, a development which raises question on government ability to finance free bills hovering around N104 billion.”

While the Nigerian Electricity Regulatory Commission (NERC) has said there are only 8,881,443 registered active electricity customers in the country, a report by Schneider Electric states that an estimated 90 per cent of Nigerians lack access to safe and efficient electricity, meaning that less than 10 million Nigeria would benefit from the freebie.

The proposal is seenas a misplaced priority by the pioneer Managing Director of the Bulk Electricity Trading (NBET), Rumundaka Wonodi, who noted that the biggest beneficiaries of the largess would be upper and middle class citizens who own and run several air conditioners, water heaters and other high electricity-consuming appliances.

Other citizens who already have prepaid meters and have loaded their units wondered how they would benefit from the scheme with the supply remaining epileptic. They said it would only make sense if government could first ensure constant supply.

It is also not clear how government will cater for corporate organisations and public agencies that have budgeted for electricity.Currently, the lawmakers are on break and may not resume until the end of the month. Should the bill follow normal procedure, it should be debated and subjected to public hearing before passage, indicating that the proposal may not be actualised as quickly as projected.

An expert, Prof. AdeolaAdenikinju, of the Department of Economics, and Centre for Petroleum, Energy Economics and Law, University of Ibadan insisted that the need to make the sector work would help Nigerians more than the proposed two-month free electricity.

Some industry players considered the move as unreasonable, with government indebted to the sector and lacking necessary revenue,wondering who would pay the monthly operational cost of the operators, knowing well that the electricity value chain totally benefits from the monthly bills paid by the consumers.

Adenikinju, who lauded the suspension of the planned hike in utility prices, said: “Nigerians will prefer more stable electricity at this time than anything. There should be a cap on estimated billing paid by unmetered households.”

To him, even if government would offer free electricity, it should be provided for only poor households and those in rural areas. “In considering the bill, I hope that the National Assembly will ensure that electricity producers and others on the value chain are paid for the electricity because there is no free launch anywhere. My preference will be to support the producers to make electricity supply more stable during the period, support poor households and possibly cap estimated billing to prevent DisCos from taking advantage of Nigerians at this tough time,” Adenikinju stated.

The professor, who is also a member of the Central Bank of Nigeria (CBN) Monetary Policy Committee, insisted that it was important that the country had a coordinated approach to government response to COVID-19.

According to Adenikinju, both the executive and legislature must work together just as the monetary and fiscal authorities must partner to understand the magnitude of the impact of the virus, its distribution across sectors and households categories and how relief could be best allocated across sectors.

Like Adenikinju, the immediate past president of Nigerian Association for Energy Economics, (NAEE), Prof. WumiIledare, flayed Gbajabiamila’s proposal.
“I am disappointed. I have utmost respect for the speaker but I think this is not the way to go. Put money in the hands of vulnerable Nigerians. Don’t spend it for them,” Iledare said.

He also sees the move as a political entitlement, saying that electricity remained a private commodity owned not by government but private investors.
“How are they going to pay for the commodity? Where is the budget? Do they even know the estimate of free electricity to 100 million households? It is a woolly thinking!

“Is the government the owner of the product they want to give for free? And at what cost to the society in the long run? Let the economic adviser team look at the sector of the economy that would be badly affected after this ordeal and develop a stimulus package to ameliorate or palliate the social economic impact. Blanket stimulus will not have as much palliative effects as targeted sectoral stimulation of the economy,” he said.