President rejects current electricity tariffs

President Muhammadu Buhari has frowned at the current electricity tariffs, stating that until there is stable power supply in the country, electricity tariffs cannot remain at their current level.The president, who was represented by the Vice President, Yemi Osinbajo, said this in Lagos on Wednesday, October 7, at at the annual general meeting of the Manufacturers Association of Nigeria (MAN) where he was the special guest of honour.

A statement by the Senior Special Assistant to the President,  Mr Laolu Akande, quoted the Vice President as saying;  "Power is, of course, crucial and as the president said in his inaugural address, to which President Mbeki referred, the question of power is one that's absolutely crucial to manufacturing and practically everything else and we shouldn't be rejoicing at 4000mw of power.

But the problems are historical and several of those problems will need tackling head on, on a day-by-day basis. One aspect of the problem that I want to speak about, because this also affects manufacturing, is the whole idea of the tariffs. Of course, the president of MAN just said that we've one of the most expensive electricity in the world. "Now, the truth of the matter is that at this point, if we want to have a cost-[reflective] tariff, the only way is to service that core value chain and ensure we're paying and compensating the value chain--from generation down to distribution--a cost effective tariff. You can't have that cost- effective tariff without some pay.  At the moment, how much it costs to produce power, and the amount of power generated, the losses on account of distribution are significant. In some cases, you've up to 40% losses in distribution, and of course, it's the distributing companies that have to take that burden. The generating companies are producing power, but they expect to be paid for all the power they produce. Now, if 40% of this is lost, it means the discos cannot collect 40%, but they've to pay for it somehow. So, government has to come in and play some kind of role in order to ensure that the whole value chain is paid for. “But the most important thing is that the cost of power is reflective of costs that have to be borrowed at every stage of the value chain and today the cost of power, if it’s going to be reflective in any way is simply what it is. It'll be very difficult indeed except if we're going to introduce yet another subsidy and by the way, a fair amount of that goes on already in the way that government supports the gencos and the discos. But I think we must be ready to accept that for a while."Until things stabilise somewhat, tariffs cannot remain at the levels at which they're today, they cannot remain at that level, and that is just simply the truth of the matter. It certainly means that there may be higher costs, but I don't think that a option of not having power is really what we want. The real issue of course is that at the end of the day, some of the cost goes to the consumer; but a cost-reflective tariff is an absolute necessity, otherwise, privatisation and all of that simply doesn't make sense".