— In the past 12 years, there have been at least 225 partial and complete failures of Nigeria's electrical system. This is bad for economic growth.
Electricity consumption and economic growth are closely associated.
Electricity is one of the primary drivers of the country’s overall development. A number of previous studies found a direct link between a nation’s ability to access energy and its level of economic development.
Economic activity requires energy to move people and things, generate goods and services, and convert raw resources into completed goods. The availability of energy is one of the production inputs that determines economic growth.
The main reason the power industry is significant to the economy is that, aside from its contribution to GDP, it makes energy easily accessible in a range of ways.
The energy sources of today include wind, solar radiation, nuclear power, biofuels, and fossil fuels.
Agriculture, industry, and services—the three primary sectors of the economy—all gain from higher productivity brought about by electricity. It improves the quality of education, healthcare, and information access.
Electricity Consumption and Economic Growth – Cost and Availability
A recent study on electricity by the National Bureau of Statistics states that the total number of customers increased by 1.89% to 11.27 million in Q1 2023 from 11.06 million in Q4 2022. Customer numbers increased by 5.99% in Q1 2023 compared to 10.63 million in Q1 2022 on an annual basis. In a similar vein, metered consumers increased by 3.61% to 5.31 million in Q1 2023 from 5.13 million the previous quarter.
This increased by 10.86% year over year from the 4.79 million amount recorded in Q1 2022.
Furthermore, the projected number of clients for the quarter was 5.96 million in Q1 2023, up 0.40% from 5.93 million in Q4 2022. Estimated users rose from 5.84 million in Q1 2022 to 1.99% in Q1 2023 on a year-over-year basis. During the period, the DISCOs earned N247.33 billion in revenue, up from N232.32 billion in Q4 2022.
Revenue earned in the reference period increased by 20.81% year over year from N204.74 billion in Q1 2022. In Q12023, the amount of electricity supplied was 5,852 (Gwh), up from 5,611 (Gwh) in Q12021. However, compared to 5,956 (Gwh) recorded in Q1 2022, the electricity supply decreased by 1.74% on an annual basis.
Strength And Income Production
The Distribution Companies generated N188.41 billion in revenue in Q2 of 2022 and N204.74 billion in revenue in Q1 of 2022. This indicates a 7.97% decline on a quarter-over-quarter basis. Year over year, revenue collection increased from N183.74 billion in Q1 2021 to N185.24 billion in Q2 2021, an increase of 11.42 percent and 1.71 percent, respectively.
Control
The Federal Government has sold 60% of its shares in the 11 DisCos to private operators and completely divested its participation in the six Generation Companies, according to the Nigeria Electricity Regulatory Commission.
The Nigerian government still owns the Transmission Company. The General Companies established as a consequence of the dismantling of the Power Holding Company of Nigeria include Afam Power Plc, Sapele Power Plc, Egbin Power Plc, Ugheli Power Plc, Kainji Power Plant, Jebba Power Plant, and Shiroro Power Plc. Of the seven, three are fully sold, one is fifty-one percent sold, and the remaining three are under a long-term concession agreement.
The Nigerian Bulk Electricity Trading Plc purchases power from GenCos and independent power plants at agreed prices stated in Power Purchase Agreements and resells to DisCos, who then deliver the power to the end user, in the post-privatised power sector. This is in spite of the fact that the NERC targeted 40,000 Megawatts of generating capacity by 2020 and needed to spend approximately $10 billion annually on the power sector for ten years to achieve this.
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A study found that there was a 2.86 percent drop in GDP for every 1% increase in power outages (measured in hours). The report states that “this translates to a loss of about $28bn in GDP.”
For the purpose of budgeting, better understanding the utility billing system, and raising concerns about charges when needed, customers require transparency in energy prices.
To accurately predict overhead costs, businesses need to be aware of changes in spending well in advance. In several nations, utilities are required to notify customers in advance of rate adjustments for multiple billing cycles. Under other circumstances, the regulator helps to make sure that rates are disclosed through a variety of media channels and that consumers are given sufficient information to enable them to compute their power bills.
Electricity’s Effects On Businesses
Infrastructure—or the lack of it—is a major concern for businesses everywhere. Entrepreneurship is hampered, in particular, by high rates and unstable electrical supplies. In a 2018 World Bank Enterprise Survey involving 139 economies, business owners ranked the availability of energy services as the fourth most obstacle to their commercial activities.
Obtaining a new power connection might be challenging due to convoluted connection processes. Businesses that are connected to the grid may have blackouts that restrict output or compel them to employ expensive generators for self-sufficiency.
Several laws and rules pertaining to general safety, technical standards, procurement procedures, internal installations, and quality of service control the connecting process.
A variety of organizations are also involved in the process, such as utilities, municipalities, testing, regulatory, and safety agencies. The processes, time, and expense required to get a new connection are indicators of connection processing speed, which is important for businesses but contributes little to the overall performance of the power sector.
Power outages affect everyone from tiny households to major industrial units, having a significant negative impact on businesses and the whole economy. According to data from the World Bank Enterprise Survey, power interruptions cost Chad’s firms 9.8% of their total sales value in 2018. Research has additionally demonstrated that insufficient energy supply has an adverse effect on investment capacity and productivity.
Dependable Electricity
According to more research, countries that can offer affordable, stable power tend to attract money from both domestic and global investors. In light of these challenges, it is imperative to guarantee a dependable supply of electricity and transparent rates in order to lessen the adverse effects of extended and frequent power outages.
The majority of the time, to lessen the detrimental effects of unstable power infrastructure, a long-term plan requiring large capital investments in the power system is required. Governments can take a number of concrete measures to ensure a more dependable electricity service, according to Doing Business research.
These include purchasing automated systems to identify network faults more quickly and restore service, investing in power system infrastructure on time, and establishing minimum quality standards for service continuity.
One of the economic areas with the most regulations is electricity services, and studies have indicated a correlation between sector performance and the caliber of regulatory bodies. High quality regulatory governance is linked to higher per capita power generation, according to a study done on 28 developing economies.
In conclusion, energy regulators have a range of responsibilities in all countries, including setting maximum limits on the frequency and duration of power outages as well as setting final consumer electricity rates. In order to encourage an effective and reliable energy sector operation, governments may find it necessary to establish an independent energy regulating body.
