2-IN-1 STORY: Fashola Says No Going Back On 45% Hike On Electricity Tariff; Power Sector Illegally Sold, Fashola Says

The Minister of Power, Works and Housing, Mr Babatunde Fashola SAN chairing a monthly meeting of key operators in the nation’s power industry declaring that he was optimistic that problems affecting the sector can be solved if everyone understands how his action or inaction affects the system.

The Federal Government has said that there will be no going back on the 45 per cent increase in electricity tariff, adding that a reversal will cost over ₦575 billion.

News Agency of Nigeria report continues:

The Minister of Power, Works and Housing, Mr Babatunde Fashola, made the statement in Abuja on Tuesday when he briefed the Senate Committees on Labour and Power during a public hearing on the new electricity tariff.

NAN recalls that the Nigeria Electricity Regulatory Commission (NERC) in January, announced a 45 per cent increment in electricity tariff.

The Senate after considering a motion at plenary in January, directed that the tariff be reversed to enable the Senate to conclude hearing on the case.

However, the minister explained that the new tariff could not be reversed as it was necessary for the market to survive.

He said that a number of indices, such as borrowing rate for investors, exchange rate, availability and cost of gas, among others also contributed to the hike.

“One of the reasons why the tariff had to go up was that a major component, a significant number of our power plant depends on gas and out of about 26 power plants that we have only about three are hydro.

“We were heavily dependent on gas, people were exporting gas because gas was selling outside the country at four dollars and it was selling for domestic use at one dollar,” he said.

The minister said that even with the recent hike in electricity tariff, Nigeria was still among countries with the lowest electricity tariffs in Africa and the world.

Fashola added that since 2005 when the power privatization process started till 2013 when it was concluded, every segment of government was involved and would share the blame if there was any failure.

“Enabling laws for the process were passed by the National Assembly in 2005, the process completed by the Executive in 2013: if the process was bad, where was oversight?’’ he asked.

Fashola, however, pleaded with the lawmakers and Nigerians to be more patient with government and investors on the process as three years was not enough to judge its success or failure.

Explaining the non-implementation of the directive by Senate to reverse the tariff, Mr Anthony Akah, Acting Chairman, NERC, said that the directive would have created avoidable setbacks in the sector.

He said if the directive was implemented, a market gap of about ₦575 billion would have been created which would have compounded the initial market gap of ₦187 billion the take-off tariff put on investors.

He said that NERC was also hindered by a court order, obtained by six generating and distribution companies.

He said that the commission could also not easily reverse the tariff as the process was in compliance with section 76 (8) of the law guiding the operations of the commission.

But the joint committee insisted that it was unacceptable for Nigerians to be paying so much but have limited power supply.

The committee adjourned the public hearing to Wednesday (today)‎.

Power Sector Illegally Sold, Fashola Says

*Sector better off before privatization – TUC

Daily Trust reports that the Federal Government and labour agreed yesterday that the power sector was illegally privatized but they differed on how to redress the “illegality.”

Labour leaders are demanding for the cancellation of the sale and reversal of 45 percent increase in tariff effected in February.

However, the government said though it agreed the deal was fraudulent there were legal issues that might make it impossible to reverse the sale.

Speaking at a Senate public hearing on the electricity tariff yesterday, Minister of Power, Works and Housing, Babatunde Fashola, said government’s interests were illegitimately sold to some private businesses.

“As a minister, I inherited a power sector where government’s interests have been illegally sold and, therefore, I don’t control how power is distributed.”

On the electricity tariff increase, the minister said that the tariff could not be reversed.
“The DISCOS made it very clear to us that if we did not give them the market reflective tariff it means that government would have to carry the continuing cost that accumulated in the region of about a trillion naira.

“The tariff was increased in 2015 and then reversed because of the electoral significance. But the debts that they created were not reversed and they continued to accrue into this administration.

“We are not insensitive to Nigerians, owing to their challenges. We were looking for the best way to solve what has become an over 60-year problem, since 1950, when TCN was first created. I guess tariffs may initially look excessive but when we count and measure the down times and how much time is lost when there is no sustainable electricity and measure them against the expectation of sustained electricity overtime, perhaps it would seem cheaper.”

Fashola, who admitted that power supply in the country had not significantly improved, said confidence had been restored in the sector.

“Yes, service hasn’t improved but confidence has come into the system. Like you have the Nigerian Communication Commission (NCC) in the telecommunication industry, NERC is for us in the power sector.” In his remarks, Anthony Akah, the acting chairman of NERC, said it was not possible to reverse the tariff.

“The review of the tariff is possible but its reversal is not,” he said.

“The tariff was essential and meant to trigger the necessary investment in the sector. The hike in the tariff was not different from what is happening in other sectors of the economy,” he added.

In his submission, the General Secretary of the National Union of Electricity Employees (NUEE), Comrade Joe Ajaero, said that the privatization of the power sector was not properly done and must, therefore be reversed.

Also speaking, the representatives of the Trade Union Congress (TUC), Chris Okonkwo, said that the power sector was better off before its privatization.

He said that the investors in the power sector lacked the technical expertise and finance to turn around the sector.

He said: “Consumers are bearing the brunt of the inefficiencies of the investors. We, at the TUC, are of the opinion that tariff increase was not the solution to the problems of the power sector.”

Former Vice President Atiku Abubakar had in April last year advised then president-elect Muhammad Buhari (Rtd) to reverse the privatization exercise of the power sector.
Atiku spoke at the 36th Kaduna International Trade Fair’s Seminar organized by the Kaduna Chamber of Commerce, Mines and Agriculture (KADCCIMA). He said the Obasanjo-led administration sunk billions of dollars into the sector, but failed to address the problem of the power sector.

The Senate had in February asked NERC to halt the 45 percent increment, following the outcry that trailed it.

The Senate Leader, Ali Ndume (APC-Borno South), recently called for the revisiting of the privatization process and its possible revocation.

Speaking with reporters in Abuja Ndume said the Nigeria Electricity Regulatory Commission had no reason to increase the tariff.

The senator said the companies bought the nation’s electricity infrastructure for almost nothing and rather than investing in them, were calling for hike in tariff.

He said: “These people took over these companies for peanuts and they have not invested. I have not seen how they will just come and be charging people indiscriminately like that.

“This is not a competitive market where you say the market forces determine the price. They just want to take advantage of Nigerians. I am against that completely. In fact, I am against the privatization completely.”