Thoughts on the electricity “road map”

So the new electricity “road map” was announced a week ago and it involved splitting up the distribution end of phcn and selling them off. The idea is to create efficiency in the distribution of electricity ( at least in terms of people paying their bills). This should make phcn ( who still owns the grid) more efficient and credit worthy which should in turn make businesses interested in power generation more credit worthy. I must admit I was hoping for alot more than that.
So what does this really mean for the electricity sector? Well for one consumers should be prepared to pay their bills in full and on time, at least for the little electricity that you will get. This should in theory create some kind of a boost to the system which should in theory entice some more investment in power generation, but only marginally.

The real issue hindering private sector investment in power generation is the pricing. The pricing is still completely controlled by the government and that is a really big disincentive for any investor. To put this in perspective let us examine the pricing of electricity as it is today. About 3 months ago there was an acknowledgement by the phcn, and the government ( and some other guys like Sanusi) that the price of electricity was too low. It is about N7 per kw (don’t quote me on that one though). It is currently about N22 naira per kw in Ghana. This improper pricing was acknowledged a while ago but guess what, it still hasnt changed. If u owned a private power plant that means you would have been loosing money for three months now while hoping for the government to adjust the price, or you would have had to shut down. The issue is not that the govt doesn’t know that the prices need to be adjusted but the actual adjusting is a political decision, not a market one. Political decisions like that don’t happen too easily ( ala N65 per litre for fuel). Nobody is going to invest in a potential loss making business. There were hints of a new pricing system in the works but seeing is believing I guess.

The second issue is that of trust. Jonathan may or may not be the president after May and if there happens to be a new guy in office you can bet he will reverse some policies. Obasanjo did it, Yar Adua did it, Jonathan did it and you can bet the new guy ( if there is a new guy) will do it as well. The firstk thing you do as a Nigerian president is to cancel some of the deeds of your predecessor. I must add that it is not only Nigerians who do it. It is just a fact about most democracies. This probably means that an investor must have real confidence to put his money on the table before the elections.

That being said, any change in the way things are done is progress. I just hoped real reforms would have been made but I guess we can always wait for another 4 years and realize we still have no electricity.

On a lighter note I had a conversation with someone a while back and she just loved GEJ. Why? They had seen a real improvement in electricity supply for the last few months. So I thought to myself, does GEJ have a magic wand? Has he somehow been able to generate more elctricity out of thin air? The answer struck me a while ago. Something about hydro electric power stations and rainfall. It is rainy season isn’t it?

Advertisements

One thought on “Thoughts on the electricity “road map”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s