Two years after the privatisation of the power sector, Nigerians, especially manufacturers, are yet to enjoy improved electricity supply. They are being slapped with arbitrary tariff increases and unwarranted disconnections. Disengaged electricity workers are agonising over non-payment of their gratuity, severance allowance and other entitlements. These have prompted calls for a review of the exercise, Assistant Editor CHIKODI OKEREOCHA reports.
The Chairman, Economic Policy Committee (EPC), Manufacturers Association of Nigeria (MAN), Mr Reginald Ike Odiah, is angry.
He does not hide his anger and frustration over the huge toll irregular electricity supply is taking on manufacturers and others operators in the economy. Odiah, the Managing Director/Chief Executive Officer, Bennett Industries Limited, was forced, at a forum, to raise the alarm that despite the handover of the power sector to private investors under privatisation, two years ago, manufacturers still spend a whopping N500 billion yearly for running and maintaining their power plants.
The forum was the 48th Annual General Meeting (AGM) of MAN Ikeja branch, Lagos. Presenting a paper titled: ‘Serious constraints to sustainability of the real sector (From a manufacturer’s perspective),’ he expressed regrets that the handover of the 18 successor companies of the defunct Power Holding Company of Nigeria (PHCN) to new core investors has failed to provide the anticipated reprieve in the form of improved electricity supply to Nigerians especially manufacturers. He said the huge cost of providing alternative electricity is largely responsible for the high production cost for manufacturers.
Giving details of the unsavoury consequences of skyrocketing cost of production to manufacturers as a result of irregular power supply, Odiah said: “Manufacturing cost in Nigeria is twice that of Ghana, four times that of South Africa and Europe, and nine times that of China and Malaysia.”
He listed other crippling effects of high production cost to include low Gross Domestic Product (GDP) contribution by the real sector, especially manufacturing to the economy; lack of interest in investing in Nigeria by both local and foreign investors; closure of factories and migration of surviving ones to greener pastures and others.
For instance, while Nigeria’s real sector contribution to GDP, according to Odiah, currently stands at 9.5 per cent, those of the United States (U.S) and China stand at 35.6 per cent and 49.5 per cent respectively. Also, Japan, India and Germany boast of 38.2 per cent, 38.4 per cent and 35.9 per cent real sector contribution to GDP, respectively. He said the sector’s low GDP contribution to the local economy caused by lack of basic infrastructure, especially electricity, is also responsible for the huge losses in tax revenue for the government as well as the high unemployment rate.
Indeed, manufacturers’ productivity and competitiveness have continued to nosedive despite the power sector privatisation. MAN President, Dr. Frank Udemba Jacobs admitted this much when he said a survey by MAN on manufacturers’ energy consumption in 2014 showed that on monthly average, manufacturers expended over N73.12 million on alternative sources of energy.
Speaking during an interactive session between the Nigeria Electricity Regulatory Commission (NERC) and MAN, he said the share of energy cost to total cost of production in the sector was about 40 per cent.
The Federal Government had in November 2013 unbundled PHCN into 18 successor companies and subsequently handed over the power assets of the successor companies to private investors. The exercise was expected to set the stage for a major transformation of the power sector to guarantee uninterrupted electricity supply to the manufacturing sector and Nigerians in general. But two years after, this has not happened. Rather than enjoy significant improvement in electricity supply, Nigeria’s electricity generation capacity has been wobbling between 3, 500 Megawatts (Mw) and 4, 000 Mw in the last two years, leaving sour taste in the mouth of consumers.
While Nigerians, in their usual never-say-die-disposition, would probably have taken the deplorable and unfortunate situation in their stride, the arbitrary and startling increase in tariff and other discomforting developments such as fixed charges and unwarranted disconnections by electricity distribution companies (DisCos) have continued to rob salt to injury. The fixed charge is that component of the tariff that commits electricity consumers to paying an certain amount of money mostly on a monthly basis, irrespective of whether electricity is consumed during the billing period or not.
The DisCos have been clamouring for tariff increase even before privatisation. They however, had their way penultimate week when Federal Government, in what could pass as ‘Christmas gift’ to DisCos, approved new electricity tariffs in the country. The new tariff regime increased tariff by about 45 per cent.
According to NERC Chief Executive Officer (CEO), Dr. Sam Amadi, electricity consumers would no longer pay the contentious and vexatious fixed charge included in the monthly electricity bills issued by the 11 DisCos in the country. Consumers would now only pay for what they consume monthly (pay-as-you-consume).
But it is doubtful if Amadi’s explanation doused growing public outcry that Nigerians are being short-changed by DisCos while NERC allegedly looked the other way.
For Mr Henry Boyo, an economic analyst, the most worrisome of the shoddy privatisation exercise was the fact that despite not getting improvement in power supply, Nigeria ended up with a loss of N400 billion after selling the DisCos. “The same group of people to whom we sold the distribution and generation companies and made a loss of N400 billion incurred from the allowances and outstanding payments to contractors and all that, suddenly find that they don’t have the money to run the companies efficiently,” he said.
Boyo told The Nation that it was curious that in spite of the fact that Nigeria ended up with N400 billion in debts as a result of selling the DisCos, government still went ahead to give the private investors soft loan to enable them run supposedly privatised entities.
“In view of the abysmal performance in the power sector, President Muhammadu Buhari should take a closer look at how Nigerians were left with over N400billion debt after the privatisation of the distribution network of the former PHCN.
“It is equally curious that two years thereafter, government continues to breastfeed the DisCos with selective interest waivers, which have not guaranteed low tariffs or improved performance,” Boyo said.
For electricity workers, privatisation of the power sector was the height of shoddiness. They are, therefore, advocating a review. Acting under the aegis of National Union of Electricity Employees (NUEE), the workers insist that the review was necessary in view of the fact that the new core investors have failed to make significant investment in the growth and development of the sector.
Speaking with The Nation at the its fifth Quadrennial/10th Delegates Conference in Lafia, the Nasarawa State capital, its immediate past National President Comrade Mansur Muhammed Musa said apart from the investment the Federal Government made in the sector before the sale, the investors have not considered it expedient to invest in the sector’s growth. This, he said, was why despite the privatisation, Nigerians still groan in darkness, lack of metres, dearth of power infrastructure and high tariff, among other issues.
While accusing the investors of smiling to the bank at the expense of Nigerians, especially workers who have little or nothing to show for their hard work, Musa pointed out that the investors have failed to meet most of the Key Performance Indicators (KPIs), which the Bureau of Public Enterprises (BPE) spelt out to them before privatisation. “I strongly advocate for a review of the privatisation exercise,” Musa emphasised, noting that the terrain and industrial climate of the sector has been gloomy after the handover of the sector to the investors about two years ago.
“If you look at what is happening in the power sector, you will see that nothing has changed. The proponents of privatisation, that is government as the leader, said there would be foreign direct investment inflow into the sector, and that there will be efficiency.
“But two years after, we have not seen investments and the owners of the new companies do not have the competence to run the power sector. All of them did not run any power sector before they came to buy,” he told The Nation.
Musa said what Nigerians are experiencing is tariff review or adjustment in collaboration with NERC despite the fact that power production is still wobbling at between 3, 00 and 4, 000 Mw while tariff keeps rising.
“NERC was to cap the ceiling of estimation; they will tell the investors or the companies that they cannot charge an estimated bill beyond certain amount. That would have encouraged the companies to supply metres to the customers, but they did not do that.
“So, what the companies are doing now is that they give estimated bills. So, you find out that you don’t have electricity, but you must pay higher bills,” he lamented.
It is not electricity workers’ grouse that is fuelling the call for a review, disengaged workers of the power firm have one complain or the other aginst the process.
At the last count, over 5, 000 disengaged staff of PHCN’s 50, 000 workforce are yet to be paid their gratuity, severance and other entitlements two years after privatisation.
NUEE General Secretary, Joe Ajaero, lamented that the government reneged on its promise to pay the gratuity and pension arrears of the workers. “The government has not fulfilled its obligation to pay the gratuity and pension of PHCN workers because each of the about 50, 000 staff of PHCN has one case or the other,” he said.
Ajaero said, for instance, over 1, 000 death benefits were yet to be paid to the next-of-kin of workers who died in service, while many former PHCN workers are yet to be paid their leave bonuses by the government. Others are also yet to get their bulk housing rent, which, before privatisation, was usually paid once a year.
“We pay bulk housing once in a year. So, if your monthly housing is N10, 000, nobody will pay you the N10, 000 at the end of the month; they will pay you N120, 000 either at the beginning or at the end of the year depending on the category you fall into to enable people pay house rent in bulk. So, many people fall under this category and they have not paid them,” he said.
He expressed regrets that the government failed to meet its obligation on the payment of workers’ entitlements despite signing agreement with the union around June 2012. He said workers’ entitlements were calculated up to that month. “By that time, if you had worked for 10 years up to June 2012, government did not pay this entitlement till October/November 2013, and there was a period of 16 months in-between. You now pay the person for those 10 years when there is additional 16 months entitlement and even pension contribution.”
He said though the union insisted that the additional 16 months cannot be national service, the government, at a stage, said it was going to pay only pension, which is 7.5 per cent, leaving the gratuity and severance component.
Ajaero, who described the power sector privatisation as an ‘arrangee’, argued that before liquidating a company, the liquidator must address the issue of creditors, and the first in the issue of creditors is employee creditors. “Under the Company and Allied Matters Act (CAMA), employee creditors are paramount,” he said.
Ajaero pointed out that the Nigeria Electricity Liability Management Company (NEMCO) Limited, which was set up to take over PHCN’s core assets, ought to have known that since PHCN has an old workforce and a pool of retirees, their pension is supposed to continue.
NERC’s position
Amid growing agitation for review of the power privatisation, NERC says it believes in the sanctity of the privatisation process. Dr Amadi said his commitment to the on-going privatisation of the power sector remains unwavering. He also reassured investors, both within and outside the country, of the regulator’s commitment to drive the reform process to a conclusive end.
On the new tariff regime, the Commission said: “It was the result of a transparent, rigorous and credible rate review process that will lead to greater reliability in the provision of electricity. It added that with the review, “more people will progressively have access to the grid, more meters will be deployed and the need for self generation would be gradually reduced.”
NERC said it expects DisCos to provide better customer service in all aspects of their operations and would hold them responsible for their service level agreements.
