Nigeria's 'crazy' power bills are pushing people into poverty

Abiola, a young woman in her thirties, owns a store along University Road in Ilorin where she sells frozen foodstuffs. The business relies heavily on electricity but it hardly comes. And when it does, it comes sparsely, cumulating into an average of four hours per day.

Despite the persistent power outage, the monthly bills were ‘’crazy’’. It was at an average of 13,000 naira ($31.52) per month. So, she thought she had enough and opted for a pre-paid meter in 2016 with the hope she would only pay for the amount of electricity she consumes.

But while this might have been the case, she has been struggling to make sense of the tariff plagued with constant hikes.

‘’This month I have recharged three times this month: the first time, 5000 naira ($12.14); the second time, 3000 naira ($7.28) and now I have done another 7000 naira ($16.99) and this is just the middle of the month. And there is no light, yesterday we only had light for two hours and it came in the midnight,’’ Abiola told TRT World. Just outside the shop, one could hear the grating noise of her petrol-powered generator.

Without much choice, she banks on the generator to maintain her three refrigerators to keep the business going but the cost of running the generator for most of the day eats deep into her daily profits, she said. Every day, she spends between 4000 naira and 5500 naira ( $9.7 - $13.3) which is a significant percentage of her daily profit.

Nigeria’s electricity debacle

Nigeria’s 200 million-odd population is supplied with just 4,996MW of electricity and only 52 percent of the population has access to the national grid. The rest do not receive electricity in any shape or form. For decades, providing constant electricity has been the holy grail of each administration.

In 2013, former president Goodluck Jonathan privatized the electricity sector purportedly to end decades of relative darkness but the sector has only grown worse in the hands of private investors. A clear sign is the constant national grid collapse which has failed three times in May alone and a total of 29 times in the past three years.

‘’If you look at the historical nature of how power and petrol has been managed in Nigeria, you would notice that both have largely been managed as public goods and not as commodities whose prices should largely be determined by market forces,’’ Ikemesit Effiong, Head of Research at SBM Intelligence told TRT World.  

"And because we have never managed those things as market goods but as social goods, there has been significant underinvestment in electricity… across all the pillars – generation, transmission and distribution and especially consumption.’’

The electricity tariff has been hiked five times between 2015 and 2021 under the current administration. The latest – a 50 percent hike – was announced five days into 2021 at a time when Nigeria was still actively reeling from the economic fallout of the coronavirus pandemic which has resulted in a skyrocketing inflation rate, now standing at 18.2 percent.

The National Electricity Regulatory Commission (NERC) refuted the report of a hike, stating that rates ‘’have been adjusted from NGN2.00 to NGN4.00 perkWhr to reflect the partial impact of inflation and movement in foreign exchange rates.’’

The January hike was eventually suspended due to threats from the National Labour Congress and an outcry from the general population but it is now back on course to be implemented in July.

The continuous hike impacts the ease of doing business in the country. The World Bank Doing Business ranking puts Nigeria 131st in the world. But the strain has become almost unbearable for small businesses.

Small and medium enterprises (SMEs) account for up to ‘’96 percent of businesses and 84 percent of employment’’ in the country and a significant amount of them rely on electricity to function. ‘’I could easily see the [hike in electricity tariff] wiping out small businesses... that have electricity as a significant input. I would argue that is already happening, they are on life support or close to being on life support. If this is not tackled, combined with other adverse economic conditions present in Nigeria, many businesses will begin to go under because it does not make sense from the profit view. It has reached an emergency level,’’ Ikemesit said.

‘’A retrogressive situation’’

Olomu, a primary-school teacher and mother of three in Ilorin, sells food items - loaves of bread, sachet water and soft drinks - in a scanty kiosk in Tanke. The business is meant to compliment her meagre teacher’s salary.

Like the majority of Nigerians, she does not have a meter, so she receives her bills at intervals. As of 2019, only 43 percent of Nigeria's electricity consumers had access to meters. Mostly, the consumers would team up to use a meter and in the total absence of one like in Olomu’s case, the rate is calculated at the discretion of the distribution company. Olomu said she pays an average of 5000 naira monthly for ‘’darkness’’.

To make up for the lack of power, she seeks an alternative in purchasing ice blocks to freeze her wares. This costs her 500 naira ($1.2) every day which amounts to almost 15,000 naira ($36.4) monthly. This alternative is almost the amount of what she makes in profit, she said.

As at the time of talking to TRT World, the distribution company serving her area has been supplying the low voltage for several days due to rainfall. The voltage supplied is not enough to power her refrigerator. ‘’And, yet, we will get a bill at the end of the month,’’ she quipped. ‘’How many bags of water will one sell in a day to make the profit where 5000 naira ($12.1) can be set aside for electricity?’’

Abiola does not see an end in sight to this. She has grown skeptical about any positive change as her years as a trader in her line of business have taught her to constantly adapt to the vagaries of the power sector, heightening the costs of running her business and making it more difficult to make ends meet.

‘’We don’t have an option than to just see ourselves coping with a situation we are not happy with; we’ve got nothing to do about it,’’ she said.

Ikemesit’s assessment of the power sector is bleak. It is not good news for small and medium business owners like Abiola and Olomu. ‘’The power sector is in so bad in shape that we will need several years of significant investment without actually seeing tangible results before we get to a point where transmission and distribution begin to pull its weight,’’ he said.

These several years would mean Abiola, Olomu and millions of business owners like them would continue to struggle against an underdeveloped power sector that is not showing auspicious signs of improvement.

‘’It has been a retrogressive situation for business. Sometimes, we have to take our eyes off the expenses. If you have to stay on electricity alone, this business would not be in existence anymore,’’ Abiola said.