The World Bank and the IMF are known as the Bretton Woods Institutions, named after the remote village in New Hampshire, U.S.A. That was where the delegates of 44 nations in July 1944, gathered to establish the twin intergovernmental pillars that support the structure of the world’s economic and financial order. Located opposite each other on Nineteenth Street, in Washington D.C., U.S.A, both institutions are regarded as John Maynard Keynes’ babies. He was arguably the most brilliant economists of the twentieth century. The World Bank is to bail out member countries in times of economic crises. The IMF, on its own, was to behave like a shock-absorber during a global financial downturn like we are experiencing currently in the wakes of COVID-19 pandemic. Since the late-1970s, the two financial international institutions have undergone a drastic shift in thinking that now befuddles many about their original mandates. Keynes must be turning in his grave, wondering what has happened to his babies.
Amid the current rampaging pandemic, many nations approached the IMF for assistance. Nigeria, a chronic wasteful spendthrift, a topic for another day, also approached the IMF for a bailout. It was granted, with some stern warnings. Nigeria, if I must say, deserves the taste of the whips of the IMF and the World Bank. The profligacy within the ruling class has become unsustainable and needs curtailing. Unfortunately, the expected bitter taste of the IMF’s pill will pass on to the ordinary people living in the country. The IMF has left the ordinary people in Nigeria, yet again, to the mercies of their ruling class. One of the IMF conditions prompted this writeup – the condition attached to the power sector. Public electricity supply in Nigeria is embarrassing and has become intractable to solve. Grid electricity remains a fraction of the cost of firing millions of generators in private hands due to economies of scale. For the Nigerian economy, it is a colossal waste and squandering of our resources as individuals spend unnecessarily to provide self-generating power.
The IMF now insists the Nigerian government, henceforth, must unshackle the power sector by allowing a cost-reflective tariff regime to enable the power industry to grow. A piece of sound advice or warning on paper, but IMF by its mandate is also to promote political stability and should not act as a bank. Nigeria’s population is approximately 200 million. With an average of five people in a family, it roughly comes to about 40 million families. Using a method of nine in a household (family plus maids extended relatives) equates to over 22 million homes. These are rough figures. Currently, 82.6 million Nigerians live below the poverty line (NBS) before the latest devaluation of the Naira. That figure will be a lot higher today. Those that lived on the fringe before depreciation will have fallen into the poverty pit, swelling the ranks. If we consider it is still 82.6 million below the poverty line, that represents 16.5 million families. People in this category are not likely to have hangers-on, translating to 16.5 million households. These vulnerable households, considering the IMF’s pill, are now expected to experience the most consistently irregular supply of public electricity or no power at all.
Of course, there exists affordable tariff of N4/kWh for those that consume less than 50KW of electricity in a month. That is the daily average elite’s household’s consumption for cooling, refrigeration and lighting. In tropical countries, like Nigeria, cooling is very compelling to everybody and the reason why 67-70% of power consumption is for cooling and refrigeration in households, workplaces, hotels, and malls. The human average skin temperature is 22°C. Anytime the ambient temperature goes below that, there is a tendency to pile up clothes; a higher temperature triggers shedding clothes. Alternatively, the environment is either heated up or cooled accordingly keeping on clothes. But hot weather has a limitation of shedding clothes because one cannot remove one’s skin. These compelling reasons drive mainly electricity consumption pattern in Nigeria. Unfortunately, the cheapest electricity is the grid, with the daily conservative demand for 12,800 megawatts. Arguably, it is in a region of 25,000 megawatts. The average power sent out on the network is 3,000 megawatts. In a regime of such immense demand for energy outstripping supply, the private power distributing companies, using market forces, will be diverting the available electricity to higher yield customers.
The power sector has to grow – a must; otherwise, Nigeria will sink. The government, whose purpose of existence is to make decisions for the happiness of the greater number of people, will have to think outside the box. Those that must have the benefits of grid power (cheapest electricity) are the 16.5 million households living below the poverty line. But without enough grid capacity, the market forces will edge them out, unless we want to continue the logjam that makes private investments remain unattractive. Electricity is unique, and more so as grid power is challenging to put into storage on a national scale. For that, the power sector is fraught with uncertainties since households, workplaces and factories do not give advanced notice on the amount of power needed or when needed. It means the industry must get the timing of the supply of power right; otherwise, it will incur losses. Lately, a daily unsustainable N2 billion worth of energy loss goes into thin air due to gas shortages, system collapse; mistimed supply; DisCos rejecting power because of weak cost recovery, etc. It is alarming, and the marketing strategy must change. Can we sustain to market electricity the way it was in 1882? That was when Thomas Edison first set up public power at the corner of Pearl Street, in Manhattan, New York, U.S.A. People are inundated unendingly with excuses of ageing equipment, inadequate wheeling capacity, etc. Time to explore other possibilities; could it be, we have been looking for the solution in the wrong direction?
Samuel Akinyele Caulcrick
Author/Power In Nigeria, will there ever be light?