The controversy pertaining to the sudden reduction in electricity tariffs few months to the 2015 elections, was resurrected recently when Eyo Ekpo, then a commissioner at the Nigerian Electricity Regulatory Commission (NERC) denied being part of the decision making the process. He also criticized the move, labelling it a “patently bad decision”.
In what can be described as a tirade between ex-government officials of former president Goodluck Jonathan, the shenanigans that preceded the privatisation of the power sector and the ensuing tariff changes was laid bare by two of the most significant people in the Nigerian Electricity Regulatory Commission, NERC.
Two officials: Dr. Sam Amadi was the NERC Chairman during the Goodluck Jonathan era while Eyo Ekpo was the commissioner in charge of Market Competition and Rates. Both men played key roles in the sale of equity in distribution and generating companies in 2013 and more than anyone else know exactly what went down.
What led to this: Eyo Ekpo was apparently responding to a series of commentary rendered by Sam Amadi on the current state of the power sector, since privatisation in 2013. The power sector is under renewed scrutiny following the end of the first 5 year period during which government is expected to review the performance of the investors in the privatised assets.
Ekpo’s tirade: In his first thread, he blamed Sam Amadi for not listening to his advice for a more cost reflective tariff, which he believed would have led to a more market-oriented industry. Thread: Ekpo’s attack.
- Rather than allow for a full cost reflective tariff, Dr. Sam Amadi, reduced tariff by zeroing collection losses which discos typically charge back to the power sector consumers.
- Collection losses are the balance of a disco’s electricity bills that never get paid by consumers.
- Eyo believes, allowing the discos to recover these losses by spreading it across customers via tariff would have given them the required funding to put measures in place (such as metering) to recover the losses.
- Therefore by reducing tariffs, instead of increasing them, discos fell into a deeper financial hole, leaving them unable to pay the market for power generated and thereby slowing down the entire power privatisation program.
- According to Eyo “@SamAmadi’s inexplicable tariff-reduction decision kicked in and had the effect of totally destroying @NERCNG’s credibility and thus confidence in the market itself. Till now, the electricity sector (it is definitely no longer a market) is yet to recover.”
- He also alleged that the former NERC chairman took the decision to reduce tariff without the support of other NERC commissioners. “Dr. Sam Amadi cannot credibly say that the tariff reduction instigated by him in March/April 2015 was a good decision taken in accordance with regulatory due process. He also cannot say truthfully that all 7 Commissioners in NERC unanimously took that decision.”
As expected, Sam Amadi responded in fiery fashion accusing Ekpo of falsehood and licking his wounds for failing to take his position as Chairman of NERC. Thread: Amadi’s reply.
- He claimed Ekpo was part of the decision making that led to the decrease in tariffs by eliminating the collection losses.
- According to Amadi, the decision to reduce collection losses was collective and included Ekpo’s input but that he was on leave when they took the decision.
- He claimed, before Eyo went on leave, his proposal for a tariff increase was not approved by the commissioners are they believed it would increase tariffs by 180%
- He also claimed the decision was based on “evidence-based” citing neighbouring Ghana, were collection losses are zero as an example. In Ghana collection losses was set at zero. This means that our tariff structure was inefficient. we were providing a
- disincentive for efficient operation. The memo was evidence based. The commission considered the memo and voted to reduce the collection losses to zero so that each disco will produce proof of its collection losses.
- He claimed members of the Steel Industry had complained that tariff increases would cripple their industry and render them bankrupt.
- He also accused Eyo of trying to take his job as NERC Chairman
Eyo replied again basically disparaging Amadi’s thread claiming he never wanted NERC leadership position and insisting that Amadi was to blame for not following through with the tariff plans they had for the industry. Thread: Eyo’s second reply.
Bottom Line: To see two ex-leaders in the power sector trade words over the privatisation of one of the most important sectors in the economy is a big shame.
- Both men are perhaps eyeing a bigger role in Nigerian Politics and trying hard to defend their roles in what many see as a poorly midwifed privatisation of the power sector.
- As Twitter user @Flexdada summed it up, “All i can deduce from this buck-passing thread from @eyooekpo and @SamAmad is that most of the people piloting the affairs of this country are bunch of egocentric people that cannot co-exist without squabbles at the detriment of the people. You guys are a huge disappointment.
- As the government considers what next to do to salvage the floundering power sector, it must ensure that the right set of leadership, with a clear understanding of how markets are designed to function, are appointed at the helm of affairs of power sector regulation and supervision.
Collection Losses explained: Assuming I sell 5,000kwh worth of power to you at N10, my revenue would be N50,000. Thus I expect that you pay me N50,000 without a loss. However, customers in Nigeria hardly pay the full electricity bill due to estimated billing. If my collection loss is 20% then it means I only get to account for 4000kwh of energy thus earning me just N40,000. This means discos are unable to pay for the full cost of power generated to them.
To mitigate this, the market charges back the losses to customers and holds discos accountable on a path to reducing those losses. To charge back and adjust the tariff it basically works from revenue to answer. It divides the 5,000kwh by the 80% (less the 20% loss) to arrive at 4000kwh. To derive the tariff it needs to charge customers so it can earn its N50,000 revenue for the 4,000kwh it can account for, it divides the revenue by the 4,000kw. N50,000/4000kwh= N12.5/kwh.
Thus tariff increases from N10kwh when the losses were zero, to N12.5kwh when the losses are 20%.
Editors note: The article has been updated to reflect new information.
AfDB board denies asking Adesina to step down, as Obasanjo says the bank risks being hijacked
“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign.”
The Bureau of the Board of Governors of the African Development Bank (AfDB) has denied media reports making the rounds that AfDB’s president, Akinwumi Adesina, has been asked to step down pending the completion of the probe and determination of allegations against him.
The bank’s top governing board members said that they have not asked Adesina to step down from his position as president, even as the board continues to review the fallout of complaints by some whistleblower. The statement from the Chairman of the bank’s board of governors, Niale Kaba, said:
“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign. All governors will be carried along in resolving the issue.’’
Kaba also stressed that there was no governance crisis at AfDB as was being speculated in certain quarters. He confirmed that the Bureau of the Board of Governors of AfDB met on Tuesday, May 26, after the request by the U.S Secretary calling for an independent probe. The essence of the meeting was to take a closer look at the allegations by the whistleblowers against Akinwumi Adesina, said allegations which had already been investigated by the ethics committee of the bank.
Kaba further disclosed that even though no decision has been taken yet, the bureau assures that it is treating the case with the utmost seriousness that it deserves.
Adesina, who maintains his innocence of those allegations, had stated that a fair, transparent, and just process will vindicate him.
In a related development, former Nigerian President Olusegun Obasanjo had thrown his weight behind Adesina and kicked against the demand by the United States of America for a fresh, independent probe of the AfDB President who had earlier been cleared by the ethics committee of the bank.
In his letter to 12 former African Presidents, Obasanjo said that Africa must stand up and not allow its institutions to be unduly controlled by non-African countries.
Obasanjo said that the bank has witnessed tremendous growth under Adesina’s leadership and has doubled its capital base since he took over.
How N400 billion ecological funding can save Nigeria’s coastline
The waves of current from the ocean have become more violent, eroding the nation’s coastline which poses a serious threat.
With the higher rainfalls predicted for the year 2020, states in Nigeria may have to worry about something more serious than a flood – the erosion of the coastlines.
According to Mr Kabiru Abdullahi, Lagos State Commissioner for Water Front Infrastructure Development, the waves of currents from the ocean have become more violent, eroding the nation’s coastline and compounding environmental degradation, and flooding.
This development is already posing serious threats to several parts of Lagos state, which is known to be a coastal city.
According to NAN, the state government had already constructed 18 groins to wade off the violent currents from the oceans, but Abdullahi admitted that given the current situation, there is a need to construct at least 60 more groins.
These groins, he explained, would act as breakers, trapping sand from moving down the beaches.
What can N400 billion do to save the situation
Coastline erosion is a seasonal problem which will always occur when there is a rise in sea level, as is expected during the rainy season. If the government does not armour the shorelines with seawalls, jetties and groins, there could be more property and land losses.
According to the commissioner, N400 billion would be just enough to construct groins to cover another 60 kilometres in addition to the 7.2 kilometres done so far.
“On the Eko Atlantic City Project, so far, 18 groins have been constructed at 400 metres intervals covering a distance of about. We still have about 60 kilometres to go which is estimated to cost about N400 Billion,” he said.
The Ecological fund is an intervention fund set up by the Federal Government to address the various environmental challenges in communities across the country, but interestingly, the Lagos state government has not accessed any ecological fund on this project so far.
Lagos state budget for 2020 was put at N1.17 trillion with environment getting N66.586 billion of the sum. With this sum, there is no way the ministry of environment can take on the task of funding a N400 billion project on coastline and shoreline protection, and this is only one of the numerous environmental challenges the state has to deal with. The state budget has even been reviewed downwards in view of the COVID-19 induced economic challenges.
Illegal dredging activities and land reclamation for urban development are also creating serious environmental issues for Lagos and left on its own, and without intervention funding from the federal government, the coastline situation could be left to deteriorate even further with the onset of the rain
As the commissioner suggested, the federal government might want to consider allocating some of the “recently released tranche of Abacha loot of about $313 million” for this purpose, as it no doubt qualifies as a critical infrastructure for the country.
New OPEC+ output cut proposal may stall if Russia …
OPEC is weighing the possibility of continuing with the current level of OPEC+ production cuts till the end of the year in order to support the oil market.
Some members of the Organization of Petroleum Exporting Country (OPEC) and Saudi Arabia are considering extending the historic production cuts of almost 10 million barrels per day beyond June.
They are weighing the possibility of continuing with the current level of OPEC+ production cuts till the end of the year in order to support the oil market; however, they are yet to get the support of Russia.
Russia could be a stumbling block to sustaining the output cut deal beyond June, though OPEC+ and top oil-producing countries had pledged in April to restrict production to 9.7 million barrels per day in May and June, and then 7.7 million barrels from July to December.
According to reports, Saudi Arabia is pushing for the deeper 9.7 million barrel per day output cut to be extended beyond June up to the end of 2020, in order to rebalance the oil market, which is still bedevilled by a lot of uncertainty and volatility.
(READ MORE: Now that Oil is back)
Russia on its part, which is a key ally to OPEC has been non-committal on this plan. The Russian government on Tuesday approved a plan to increase oil production as soon as the OPEC+ deal ends. This they hope to achieve by having new oil wells drilled this year and in 2021 for 2022 production.
According to a report from oilprice.com, Saudi Arabia believes the oil market still needs support and wants to continue with the current output cut until the end of the year. Russia wants the same, but the major challenge is with the oil companies who had failed to reach any agreement at their meeting on Tuesday.
About half of the Russian oil firms support the extension of the current output cut while the other half are against the extension but rather calling for the continuation of output cut that was earlier agreed by OPEC+. As a result, Russia is typically non-committal and would wait to see how much oil demand will recover.