angel101:

also GSM call costs are high because OBJ greedily auctioned the licenses and caused these companies to pay an unecessaryily high price, plus there is no regulation to guide the way they operate. they are allowed to get away with murder! forget NCC they are just sleeping dogs.

There is no issue of greed as regards the GSM licence.

The Dutch auction style was adopted to promote transparency because any company that failed to get a licence would have claimed that the government gave the licences to their fronts or friends.

The process was a huge success and should be commended.

We must learn to apportion blame appropriately.

I'll summarize

More IPPs(if maintained properly and regularly supplied with the needed amount of gas)-------------More electricity-----------------Provided pipelines aren't blown up, or equipment aren't vandlaised-----------------------corruption or no corruption, if the above step is carried out on all IPPs built and they are built then, there is no proble, thank you, that is all

@debosky

The private sector is not forthcoming in either the power sector or in the petroleum sector cos neither has been fully deregulated.

In the latter sector,Govt still negotiates fuel price with the labour unions before announcing it.In a fully deregulated market,the price is simply determined by market forces and if the private sector is not certain that they can recoup their investment then naturally no one is going to build refineries not having the freedom to determine the price they will charge for their products.

Same thing goes for power.No private coy will build power stations when they don't have the freedom to charge the price they want for the power they generate .

Its not enough for the Govt to announce that a sector is deregulated.They have to remove the mountains of regulatory constraints to entice the private sector to move in.

Afam:

There is no issue of greed as regards the GSM licence.

The Dutch auction style was adopted to promote transparency because any company that failed to get a licence would have claimed that the government gave the licences to their fronts or friends.

The process was a huge success and should be commended.

We must learn to apportion blame appropriately.

would it not have made sense to have a ceiling though?

alabiyemmy:

greedily - as if obj put the money in his pocket.

well i dont know where he put it. do u?

@ 4play enticing the private sector is a delicate balancing act, it can't happen in one day, but I believe the process is beginning

the NEC - National Energy Commission is being set up to monitor and regulate the power sector, government intervention is inevitable for now, the issues are too great for the private sector to come in and take over. what they will say is this: if a govt with 40billion in reserves wont invest in its own economy, why should we? the impetus for the private sector to come in is what the government is doing, that is a good beginning and I believe things will move forward from there.

as a caveat, the restiveness of the ND has to be curtailed, if not these power generation schemes will fail due to vandalisation of pipelines

something is being done about this though, the NIPP project states that villages within 5km radius of the power plants will be directly connected to it, so they will have an interest in making sure vandalism of the pipelines doesn't go on.

@debosky

I agree that the process of deregulation is inherently painstaking and complex,taking time to complete

I do however feel that the process in Nigeria is half hearted and insincere and that the private sector is rightfully hedging its bet.How do you explain the never ending deregulation of the downstream petroleum sector.The Govt is not fully committed to the cause due to due to various constraints,particularly political.

If the Govt was genuinely committed to deregulation,like they were with the GSM market,the private sector would have been eagerly investing already.There won't have been any need for the Govt to fund anymore power plants.

I don't think the government should completely deregulate the power sector all in the name of seeking private investors- at least not now
the private sector in Nigeria don't have restrictions on pricing and performance.

with all the investment in the communication sector people still apparently pay through their noses for basic services

with all the investment in the communication sector people still apparently pay through their noses for basic services

This violates basic common sense. The more the investment in a service, the more you will have to pay. Duh!
If prices in the telecoms sector are so high, then why does every conductor now have a mobile phone?

the private sector in Nigeria don't have restrictions on pricing and performance.

Restricting pricing is the second reason why NEPA will never work. If prices are forced down, shortage is guaranteed. Restricted pricing is why we have lots of fuel scarcity and power outtages. Funny enough, we don't have food scarcity. Do you want to know why? It's because the price of food products are not restricted. If you want excellent supply, you must give investors a reward for their labor i.e. profit. Economics 101 sir.

If you're really concerned about pricing, you will favor complete deregulation, because market competition is the only mechanism that can consistently drive down prices without leading to any form of scarcity.

obviously I'm not an economic guru duh!

The more the investment in a service, the more you will have to pay.  Duh!

Erm i don't think so,don't have any special term to describe it but im sure the more competitors in a sector the less one will have to pay duh!!

If there are more operators going to nigeria you think BA will still be charging the same fair as they were in 2000?

Seun sometimes you sound like an economic textbook all theory 

Say no to capitalism without a human face! 
Say no to grab-all investors/enterpreneurs 

angel101:

would it not have made sense to have a ceiling though?

It would have made sense but that would still amount to government interference and the government I believe wanted a free and fair licencing process for the GSM licences available.

If the same type of openness is employed in everything the government does then Nigeria would have been a lot better.

On more investemnt vs more to pay theory, it is flat wrong and defies all logic. Competition results in lower prices and better quality of services.

The pricing is an issue, but is not the main problem with NEPA, its inefficiency and poor maintenance of its facilities are the crux. until recently it still operated with capital votes from the government as a public utility and it was poorly managed, maintenance wasn't scheduled, proper investment was not carried out, till the system collapsed

We need massive investment now, which no private body will think of doing, unless we are seen to be putting our own money where our mouth is - investing in the same sector. when you are serious with your own business, then others will come in to work with you.

a proper regulatory framework and the movement towards appropriate tariffs will ensure efficient use of resources and allow serious private investors to follow the lead of government and implement power projects.

the situatin may be pretty bleak at the moment, but I believe in the next 6-8 months things will improve considerably.

debosky:


We need massive investment now, which no private body will think of doing, unless we are seen to be putting our own money where our mouth is - investing in the same sector. when you are serious with your own business, then others will come in to work with you.

Here is where I have a problem with your posts.We don't have to invest in the power sector just to attract private investment.We didn't have to do that with GSM to attract private investment .

If the Govt was sincere and committed to deregulation,the private sector will be eager to come in.

I don't think so 4play, if you have 44 billion and you stash it abroad and dont spend it on your economy, why would somebody from outside be encouraged to spend on yours? especially in Nigeria's case where we are emerging from a period where the government has been untrustworthy for so long.

the government is committed, but full blown privatisation can't be had in Nigeria now. we still need to move a little further down the line till the full effect of privatisation can be felt.

@debosky

Having $44billion in foreign reserves improves your attractiveness for investment.By analogy to human beings,your financial position looks better if you have a good bank balance.Investors don't look at our $44 billion reserves and frown in disgust,it is one of many things that makes us a more attractive investment destination.

That is why many countries build up their's.As at August 2006, countries like Russia had($243billion),  Singapore($128billion),S.Korea($225billion),Taiwan($260billon).They had it not because they were clueless  buffons who didn't know what to do with their money but because it helps a nation's economy to have a rainy day fund.

If we need to spend our relatively puny reserves in the power sector just so that we can attract private investment,one must ask,why stop there?Our manufacturing sector is woeful and needs private investment,we might as well pour in govt funding into building factories.

Any sector which needs private investment might then require Govt spending .At the end we will be rolling back the march of economic liberalisation and adopting Soviet style Central Planning.

If we have learnt anything over the past few decades,it is that Govt has no business in business.Full deregulation will attract private investment and not Govt spending

point taken, but note that those countries have functioning basic infrastructure - they didnt just hold up money when there were direly needed projects to be executed. We are spending close to 3billion on the current NIPP, that should jump start the system. the process of attracting investors is not as simple as merely deregulating, it involves making the country attractive to invest in

example if the country is seen as serious in dealing with infrastructural issues and a company, say Hyundai gets interested and wants to build semiconductors, that attracts other firms to want to provide the back up infrastructure for this company to run.

its a twin effort of investing some of your own funds, and attracting external funding that will work in Nigeria, total public or total private will not succeed, at least not right now

Continued privatization & deregulation of the economy is the only way forward for Nigeria. Almost 50 years of continued stewardship of the mostly government run economy should tell us that they have no business whatsoever in running a business. The government should only be there as an arbiter to foster competition between private enterprises. Look all over the world and count how many government run business(es) are successful. Though there are a few, they are in most cases an exception to the norm.

Same thing goes with public utilities. NEPA has failed woefully because it's a government run monopoly. I tell you even if it was a private monopoly it would still probably have been in a far better position. Therefore, genuinely allowing private enterprises (without any obstruction/unnecessary regulation) to compete in the generation and transmission and determining how much they choose to charge would go along way in improving power situation in Nigeria. If you go by demand and supply eventually market forces will determine pricing. If it’s too expensive people will find ways to reduce their consumption hence there's less demand and prices drops. With other factors like more power plants coming on-line, the net effect is that more power becomes available in the distribution level of the power cycle, economics tell us more supply and same demand leads to lower prices.

There are actually a few private investors in the generation level right now. With more liberalization (generating companies determining what they want to charge) even more companies will get into the business. The Oil Refinery license issue by an earlier poster is a very good example. If the government determines how much refined products should cost then how are these companies supposed to make a profit or run an effective business. By the way refineries are very capital intensive and having an inefficient price control mechanism results in shortages ala smuggling to neighboring countries to get the best price.

Is the price of GSM call time or availability to those who want it going up or down? You're very smart, you already know the answer, Just 10 years ago u could count how many people had mobiles but look at the difference now. What if we sincerely started what we're doing now 20 years ago only God knows where we will be today. Honestly if we don't solve the infrastructure problem in Nigeria and especially power/transportation, economic growth will not move as much as we want to. Think how many industries/factories will be setup if there is a decent availability of Power and good 1st rate road/rail networks to move products especially for exports, remember we have a decent, less expensive, educated (too some extent) workforce.

My friends if we Nigerians wait for the government to do everything for us we will never move forward in this country. Their job should be to provide good decent roads/transportation mechanism, uphold the rule of law/protecting its citizens, minimal business regulation ala creating a level playing field for private enterprises, education up to the secondary school level, collecting taxes, cleaning the streets/picking up the garbage (damn look at how dirty some parts of our country is), pretty much we need less government in our lives and take more responsibilities for ourselves, Big government leads to wastes and corruption (cronies need to be taken care of) that's not to say there shouldn't be a role for the government, it should just be to a minimum.

I've been reading this forum for sometime as a spectator and decided to add my views,

Thanks @ watchung

some people write and talk on this forum as if they know everything. Abeg make dem go wipe their butt with sand paper.

with all due respect, mobile phone operations and power generation are different, the market was non-existent before the GSM operators came, so they had free reign to set things up as they best deemed fit. the power sector already has some infrastructure in place, unless it is a concerted effort directed at truly deregulating ( at the risk of inflaming public rage due to escalating cost), the sector may get the private drive it requires.

the oil refineries is a case in point - 17 licenses were issued over 4 years ago, but not a single refinery has been built, because it makes more economic sense to import and sell, showing that 'private sector' driven may not be the panacea in all cases

anyways some good news on the power sector today - gas supply to Egbin thermal station has been restored, the near total blackout should have a little improvement as a result, but nothing drastic till the Chanomi pipeline is repaired in 54days, and the two new additional power stations commissioned at the end of April.

Continued privatization & deregulation of the economy is the only way forward for Nigeria. Almost 50 years of continued stewardship of the mostly government run economy should tell us that they have no business whatsoever in running a business

This is false. British rail was privtaised yet it worse-off compare to German and Swiss rail which are 100% government owned.

It is the genuie inteest of people that makes things work.!

babasin:

This is false. British rail was privtaised yet it worse-off compare to German and Swiss rail which are 100% government owned.

It is the genuie inteest of people that makes things work.!

This is complete hogwash.The failure of the privatisation of British Rail does not give grounds to proclaim the futility of privatisation.British Rail was the sole failure out of hundreds of privatised British enterprises;British Steel,British Telecom,British Airways,British Gas,British Aerospace.e.t.c.

It is immensely illogical to proclaim the failure of privatisation on the basis of a one-off failure while ignoring innumerable examples of success.

I live in Britain and there is not a single major party that condemns these privatisations nor is there is any sense that people want to go back to the old days when they had to wait months for a phone line from British Telecom.

@debosky Yes, indeed mobile phone operations and power generation are fundamentally different, the nexus between them is that guess what? they are both businesses. I only used mobile phone systems as a powerful illustration of what "TRUE" deregulation and privatization can do to an economy. If we had done this a long time ago only God know how state of the art our overall communications systems would have been.

the market was non-existent before the GSM operators came, so they had free reign to set things up as they best deemed fit

you almost made my point, GSM absolutely non-existent, power generation--->something is already on the ground. Your words "free reign to set things up as they best deemed fit" If there were regulatory handicaps as far as how much they can charge for airtime, it is almost very certain that those investment wouldn't have been made.

unless it is a concerted effort directed at truly deregulating ( at the risk of inflaming public rage due to escalating cost), the sector may get the private drive it requires.

There you go, it has to be true deregulation, and yes the consumer will initially experience price shocks but guess what? there would be power available and they would adjust accordingly, an earlier poster gave a good example of why there are no food shortages and that is because the market determines prices, if power generating companies where truely allowed to sell power at whatever price they so choose, the market becomes attractive and hence, more players would want to get in to reap the rewards, this leads to competition and maybe a price war and eventually lower prices for the consumer.

To deviate off topic a little bit, it makes absolutely no economic sense whatsoever for Nigeria to import refined petroleum products, first of all the government is paying the market price for these products and eventually subsidizes it for the general public, how many billion of dollars is the government losing/wasting doing this? This is the most stupid thing we are doing in Nigeria, sell oil at an average of $60+/barrel then import refined fuel at double that. VERY RIDICULOUS. Eventually a lot of these products find their way out ala smuggling so as to get the best price possible thereby resulting in shortages, the government shouldn't be in the business of selling fuel especially in a corrupt society like Nigeria. Now, with the government subsidizing the price of fuel and determining how much it costs, it is almost very likely that no one will invest in building refineries if they can't be guaranteed that they will make a profit. Now if tomorrow a bill is signed guaranteeing refiners the ability to charge whatsoever they want there will definitely be a scramble to build said refineries. Refineries cost several hundreds of millions of dollar to build and with government setting prices, almost no financial institution will lend money for such a capital intensive project.

Okay I agree in some societies government run utilities do get the job done however, those are usually an exeception to the norm and in almost every instance they are less efficient than private run entities in COMPARABLE societies.

If we keep on waiting and depending on the government for everything from providing power to any other thing, we will remain where we are for eternity.

@watchung

Good point.My proposed solution to the problem of costly tarrifs in the event of full deregulation is for the Govt to subsidise costs for private consunmers.

While I am principally opposed to Govt subsidies,I feel it is the only way such a policy can gain public support.

Industrial users of energy will get no such subsidy and will be charged the full cost.

The solution to costly prices in the private sector has always been competition. Pure and simple. That is what keeps prices in the communications sector in check. Subsidization of electricity will just be an opportunity for certain political parasites to steal our money. Nigerians are willing and able to pay for reliable eletricity, if it's available.

The suggestion that industries should subsidize free loaders sitting at home will only slow down development.

4 Play

The failure of the privatisation of British Rail does not give grounds to proclaim the futility of privatisation.

I have given you very clear comparism; British rail which was privitized is a failure while German and Swiss which are 100% government are huge success.

The point is NIGERIANS should not be decieved that privitization is solution to ALL the decay in government corporation!!

It is innovation, ingenuity, education, orientation of the people that makes things work.

Enron, Pan Am were privitized and collapsed like park of Cards. Okada air was private and is dead like dodo.

If privitization is the key; why do we have government?? we could just privitized the Presidency, Senate, Courts etc,

We have the government because it's a lesser evil. They should focus on maintaining law and order in society.

Seun:

The solution to costly prices in the private sector has always been competition. Pure and simple. That is what keeps prices in the communications sector in check. Subsidization of electricity will just be an opportunity for certain political parasites to steal our money. Nigerians are willing and able to pay for reliable eletricity, if it's available.

The suggestion that industries should subsidize free loaders sitting at home will only slow down development.

not exactly,
i've observed that in nigeria, most organisations share the market.

a simple example you've all seen the foreign pepsi ads that poke so much fun at coke. have you ever seen such an ad in nigeria.when the price of coca cola goes up, that of pepsi immediately does to.

its only the appearnace of a new competitor that may force a change, which is what happened with glo.
weren't MTN and econet sharing the market back then?its the same reason so many products are never improved.for years maybe decades, omo and elephant detergent were blue industrial grade detergents only fit for aging jeans.
naija capitalism is a different kind of game,

its only the appearnace of a new competitor that may force a change

This is a case of limited competition versus unlimited competition. Limited competition occurs when an industry is privatized but the government prevents new competitors from entering the industry through over-regulation. The result of that is that the existing companies can collude with each other to keep prices artificially high. The solution is to remove all barriers to entry so that new competitors can enter the market and reintroduce competition.

In order words, when deregulation fails, it is often because the deregulation is not carried far enough. When the government privatizes an industry, it often fails to leave open the door for new entrepreneurs.

You know I'm very fascinated by the discussion that is going on this board, as I said I've been an observer for some time now. Discussions like this on the role of government vs. the private sector should be the reason why we elect leaders. Our elections should be about ideas and what a candidate stands for, unfortunately right now that's not the case. When elections in Nigeria are about ideas i.e. left vs. right, capitalist vs. socialist, big government vs. small government, privatization/deregulation vs. more government/heavy handed regulation, then I know my country has arrived. However, with more elections and the growth of the various institutions of government we will eventually get there. That is why it's imperative this election takes place as scheduled regardless of what happens even if it's not the freest of an election. With more time and elections behind us we become more sophisticated, culture, civilized and enlightened and then maybe 8 years from now what we are discussing here will be what candidates for elected postions are talking about.

@ Seun
You do hit the mark when analyzing the situation of limited competition and unlimited competition. Limited competition my lead to the situation whereby a duopoly arises e.g. in the Coca-Cola and Pepsi example. Now with less barriers more companies can come in and set up/create whatever kind of drinks they want thereby creating MORE choices. I tell you if Nigerians did have a lot more choices as far as what they can consume is concerned then Coca-Cola and Pepsi would have a lot on their hands. Frankly they're not even good for the health. Lol. But that's another story.

Nigeria really needs to get its infrastructure especially its power sector in order before any meaningful development/job creation can take place. Our economy is indeed growing but I tell you we should expect double digit growth when we have a descent power sector for industries/service based companies to utilize. The cost of powering up industrial plants/factories is too prohibitive right now and that's one of the reason our manufacturing sector is not moving forward. With a good road/rail infrastructure, goods can be moved from place to place cheaper and efficiently thus spurring growth.

The government needs to make it a lot easier for businesses to setup up shop and absolutely stay away from how businesses are run. The only role for the government in this case should be as an honest broker/referee between competing entities.

babasin:


Enron, Pan Am were privitized and collapsed like park of Cards. Okada air was private and is dead like dodo.

If privitization is the key; why do we have government?? we could just privitized the Presidency, Senate, Courts etc,

Pan Am/Enron were never privatized. As a matter of fact they were never owned by the American government. Yes Okada failed because it was most likely an inefficiently run company. In economics we know that companies will fail and others will flourish. Now that's what competition is all about. Enron failed because it cooked its books. Pretty much it was a sham of a company and declared bankruptcy so as avoid paying heavy fines in court.

Why don't we privatize the government? well strange enough there are some things that can be done more efficiently by the government like public safety/law and order, fighting wars, enforcing rules/regulations for businesses, creating laws and policies that benefit the populace, in a nutshell we need the government so as to avoid anarchy and lawlessness however, they should rear their heads as less as possible.

Now this is from the Guardian
<sub>Power Supply: Where Have All The Billions Gone?
BY CHARLES ADINGDUPU
NO doubt, the federal government has been making frantic efforts to nip the seemingly intractable problems of the Power Holding Company of Nigeria (PHCN) in the bud. Much money has been injected towards the resuscitation of the power authority's antiquated infrastructure without corresponding result.

In the last six years, the Power Holding Company of Nigeria received a whooping sum of N244 billion from the federal government to improve power supply but all to no avail.

The President, Senior Staff Association of Electricity and Allied Companies, Godwin Ifeanacho, who made this disclosure to journalists recently in Abuja, said the amount was used for the refurbishment of dilapidated power infrastructure from 1999 to date.

According to him, the funds helped in pushing up the generation capacity from 1, 600megawatts in 1999 to 3, 600mw in 2006.

"Today, we have the capacity to generate 3, 600mw but the major concern that is worsening power supply is the spate of vandalism of pipelines in the Niger Delta", he said.

But Nigerians have not stopped lamenting the frequent power outages across the country. "Electricity supply and distribution have become a political tools in the hands of greedy and ambitious politicians. They make empty promises", said a Lagos-based business centre operator, Samuel Akande.

Also recently, the federal government announced that it would commit a total of N80 billion to the purchase and installation of new injection substations across the country as part of implementation of the National Integrated Power Projects (NIPP). The Adviser to the President on Electricity Power, Engineer Joseph Makoju, who made this disclosure in Abuja, said the money would be spent on improving the distribution network.

Makoju said there are two major projects being implemented with the aid of the World Bank. According to him, the World Bank has also extended further facility in form of National Electric Development Project, which is perhaps making the greatest impact in effort to commercialise the power sector.

World Bank is funding the transmission in development project at the cost of $100million while the National Energy Development Project is gulping $72 million.

Under the new initiative, the federal government will be expected to spend $40 million to upgrade power distribution facilities in Karu, Nyanya, Maraba and Kubwa in the Federal Capital Territory (FCT), and Ogba, LUTH area, Idi-Araba, Agege in Lagos State, and Ibadan in Oyo State.


It will be recalled that upon assumption of office in 1999, President Olusegun Obasanjo assured Nigerians that the epileptic power supply would be a thing of the past. Ironically, eight years into his administration, the problem of electricity supply and distribution have grown from bad to worse across the country. Both government officials and workers of the PHCN have heaped the blame on militants in the Niger Delta area for tampering with gas pipelines.</sub>


How many private entities will spend N244 billion and still have almost nothing to show for it. Now don't get me wrong some progress has been made especially during this administration however, the point I'm trying to underscore here is that a private corporation would have done a lot more with that money and as well as doing it more efficiently .

Seun:

The solution to costly prices in the private sector has always been competition. Pure and simple. That is what keeps prices in the communications sector in check. Subsidization of electricity will just be an opportunity for certain political parasites to steal our money.  Nigerians are willing and able to pay for reliable eletricity, if it's available.

The suggestion that industries should subsidize free loaders sitting at home will only slow down development.

The average household bill for electricity in the UK is £383(91000Naira) per annum.That works out at about 7600 Naira a month.Do you think that the average Nigerian family can afford  that amount?

Remember the UK has one of the most deregulated markets in the World.Even if we adjust for the fact that we have ample domestic gas resources and that our electricty does not run for 24 hours(unlike the UK),I am very sceptical that Nigerians will be able and willing to bear the full cost of electricity.

It is true that subsidies are inherently wasteful and promotes corruption but I think it is only the way the policy will work for the average Nigerian

References made to the deflationary effect on prices  in the communications market are inapplicable.Before deregulation,prices in the Nigerian communications market were known to be far above worldwide averages.Telephones were not seen by the Govt as an essential commodity.Remember David Mark's(former Communications Minister) comments to the effect that 'phones are not for the poor'.

On the other hand,electric tarrifs(like fuel prices) in Nigeria are already one of the cheapest  in the World and will only go up after deregulation and not down.They have been artificially held down by the Govt

If we have a rapid spike in electric prices,that will be catastrophic for the economy with inflationary consequences.While I am reluctant to endorse subsidies,I think this is one area where I will support it for private consunmers of electricity

We can have a fully deregulated market for industrial users with no subsidies.It is industry and not residential users that will benefit the most from deregulation and hence will be prepared and able to pay the full cost.It beats having to purchase private power generation capacity

A rapid spike in electricity prices will not cause the inflation you worry about - if the power is stable for 24 hours, it will simply reduce the dependence on generators which has become almost standard in most homes and businesses that can afford it.

the solution i believe is for the govt to spend the initial funds to set up the power infrastructure, then when people have a semblance of regular (even if not 24hrs) power supply, then you can raise rates and farm out the facilities to be managed by private firms with a revenue sharing agreement and maintenance plan.

simply raising prices will not achieve the goal, when people feel a service is available then they will be willing to pay

@ 4play the 7600 naira a month is on average what most households spend on diesel/petrol generators monthly to generate power for 5-6 hours a day, in addition to the regular NEPA bills.

I believe that figure is not too high for Nigerians to pay, it will free up energies used for repairing generators and buying fuel for other productive enterprises, as welll as more time to be engaged in useful activities by not being tied down by lack of power.