Do you know who I am?

The news about the Magodo/Ikeja Electric deal is in some ways, the best news of the year so far. The power sector reform designed and partially implemented by the Goodluck Jonathan administration led to the unbundling of the Power Holding Company of Nigeria (PHCN) into a series of 18 successor companies — six generation companies, 11 distribution companies and a national power transmission company (retained as a government-owned entity). There was substantial investment in the generation arm which led to an installed generation capacity estimated at over 12,000MW. However, the failure of the government to invest in transmission infrastructure means that today less than 5,000MW can be evacuated. Perhaps a bigger issue is that the insistence of the FG on fixing electricity tariffs has plunged the distribution companies into crippling debts which they are unable to service, hence the demand by theses distribution companies has sunk to below 4,000MW leading to huge wastage across the value chain. This led the former power minister, Babatunde Fashola, to develop the Premium Power Initiative under which the Magodo Residents’ Association and Ikeja Electric have signed on, something that we consider to be a very welcome development. The biggest issue in Nigeria’s power industry today is the fact that the tariff is not cost-reflective, hindering investment in the industry. On the net, this agreement is cheaper for the residents who will spend less on fueling their generators, and more profitable for the Ikeja Distribution Company, a win-win for both parties. It is prudent for Nigerians to view their cost of power as a whole, as opposed to electricity tariffs in a silo, in order to appreciate the gains this will bring. If this succeeds, the likelihood is that more gated communities will sign up to similar schemes, showing a path to profitability in the sector, and eventually attracting more investment.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store