Worrying MDA’s N60 billion electricity debt

THE disclosure that some ministries, departments and agencies collectively have an outstanding N60 billion electricity debt to settle raises grave questions about public finance management and government’s readiness to quickly tackle the nation’s electricity crisis. The Association of Nigerian Electricity Distributors that made the claim said the N58 billion agencies at the three tiers of government owed power firms as of December 2015 had increased to about N60 billion and was still rising. The scandalous revelation is coming amid the sound and fury of electricity rate increases that are bound to hurt consumers and harm the economy the more.  Before the power problem can be resolved – and the prospects are becoming more elusive by the day – MDAs must be made to lead by example.

Certainly, by not following through in resolving specific problems hampering power supply, the Muhammadu Buhari government may be shooting itself in the foot. Last October, it was announced that the Federal Government had commenced the deduction of the N32 billion the MDAs owed then from source. Sunday Oduntan, ANED Executive Director, said the Vice-President, Yemi Osinbajo, had offered to take up the case at a meeting attended by NERC, Market Operators, the Nigerian Bulk Electricity Trading, generating firms and distribution companies. “I can assure (Nigerians) that this government is very serious, determined and sincere to provide electricity. The Federal Government has started looking at those issues. He promised us that MDAs will pay the debts.” But six months after, as the same Oduntan has cried out again, the MDAs have not only defaulted, they have almost doubled the debt burden.

Three months ago, Babatunde Fashola, Power, Works and Housing Minister, also harped on the necessity for everybody that consumed power to pay for what they consumed and government would start by setting example.“I am happy to say that the Ministry of Power does not owe. Now, we are already planning to ensure that all other ministries, Works and Housing, bring up their books so that we can pay up whatever we are owing the power providers. And this, we expect, will demonstrate to other consumers, including departments, commissions, military, security; everybody must pay what they have owed,” he had said.

The failure of government to pay its electricity debt shows that we have been pursuing power sector reform the wrong way. And what is at stake?  The DisCos are offered a ready-made excuse for their inadequate capital base; “crazy” and estimated billing and refusal to meet deadlines on pre-paid meter installation. The implication is that it is the general electricity consumers that are subsidising the power firms’ inefficiency and the MDAs’ chronic indebtedness.

But what is most painful in all this is that while the captive electricity consumers are paying for services not rendered, the DisCos continue to supply power to these debtors, especially the military, for between eight and 15 hours daily. In many instances, unruly soldiers have reportedly stormed DisCo offices and manhandled innocent members of staff. And this is an organisation that has a N15 billion debt tag.

It is obvious that the business environment for private-sector driven electricity market is still far-fetched. With an installed generating capacity of about 7,500MW and operating capacity of 4,000MW, according toPricewaterhouseCoopers, electricity power in Nigeria has been a major hindrance to economic diversification and growth.The hope that a market-oriented reform will turn the sector around is fast disappearing.

The idea of electricity as a commercial service was first put to practice in Chile in 1982, according to Cezley Sampson, a Canada-based Energy Consultant. However, it was the success of the radical separation in England and Wales in 1991 which set in motion the introduction of the competitive model and end of the vertically integrated state-owned monopoly model.

Virtually all the problems associated with the National Power Electricity Authority, including massive build-up of debt obligation, low generation capacity, migration of energy intensive industry from Nigeria, long periods and constant power cuts, less than 25 per cent of citizens receive grid connected electricity, and low per capita consumption are still tragically messing up the economy.

What is to be done?  Fashola and the regulators should urgently take up the MDAs debt issue with the Presidency. But the payment arrangement should be tied to the DisCos’ readiness to comply with a set deadline for the metering programme nationally. DisCos have been making unverified claims on their metering plans. It is up to the NERC to protect the rights of consumers by ensuring that the nauseating arbitrary billing ends.  The two years being proposed by the DisCos, purportedly in line with the so-called “performance agreement” signed with the government, to meter every consumer, should be rejected.