Analyst predicts ineffectiveness of new price

The Group Managing Director/Chief Executive Officer, CFL Group of Companies, Mr. Lai Omotola, has expressed his reservation over the increase in electricity tariff and the process leading to the handover of power firms to private investors.

He commented that the tariff increase was an avenue employed by the power company to help them pay debts they owe to banks.

READ: Power firms warns of nationwide blackout

He said, “The new tariff regime will not produce the desired result the way the Minister of Power, Mr. Babatunde Fashola, has painted it. The reasons are not far-fetched.

“The reasons really border on two main factors. One is the technical capacity of our indigenous companies as it were today. Two is the financial capacity of the indigenous companies to bring together necessary infrastructure that can guarantee steady supply of electricity in the country.”

He added that, “In 2013, the Federal Government and the Bureau of Public Enterprises raked in a sum of $2.6bn. I can say about 80 per cent of the fund was provided by the Nigerian banks.

“Ordinarily, it should not be that way because foreign investors are primarily supposed to bring majority of their own equities in terms of the capital mix, where you find investors bring at least 60 per cent equity.”

“There are two factors with the Nigerian banks. One is the high-interest rate. Two is the tenure of their funds. These two factors cannot successfully finance the electricity industry. They can only act as working capital incentive. What we find today is that the Nigerian banks financed in dollars-dominated terms.

“Already, interest rate has gone up. The value of dollar to naira had doubled over the space of two years. The resultant effect, if the truth must be told, is that the accounts of our indigenous companies are not doing well in the banks.”

The senate has appealed to the power companies to consider a tariff reversal in response to calls by consumers and the labour union to return to the old price.

This has however led to the power company threatening that a blackout might be the result from such an action.