budaatum:


Electrical Tomatoes

The emboldened is about the only bit of this that got my attention but I notice it caught no one else's.

"Price controls"! It means a product is kept at a price set by government, and in Nigeria, we know it's kept low and very likely beneath the cost at which it can be sold at a profit. Like petrol really. But we can at least claim a reason for petrol with our crude oil and our ineptitude at running refineries. Electric though!?

Imagine it were tomatoes. You invest in land and fertiliser and labour and grow them, and when you get them to the market, government sets the price. I'm absolutely certain if that price is higher than the cost at which you grow your tomatoes, you wouldn't mind much. You'd likely be delighted if it's high enough for you to make a tidy profit. And if you're fortunate and the price set is so high, you'd likely invest in more land and more fertilizer and more labour and grow even more tomatoes. But this is Naija, where the price set by government is more likely to be way below your costs so that after you sell your tomatoes, you would have lost money.

Now think, you lost money on your tomatoes. Are you going to plant tomatoes next season? If you're into the charity business or you're stupid, you just might. But if you're not and have rent and school fees for your kids to pay and you want to eat and pay the interest on a loan I very much doubt you'd be stupid enough to throw your money away growing unprofitable tomatoes!

Well, that's the case with electricity in Nigeria I'm afraid. You generate it, transport it along unreliable transmission wires, lose a large chunk of it to illegal use and theft and what you do get paid for does not cover the cost of producing it. Now tell, would you plant electricity next season? I very much doubt it unless you're into the charity business or you're stupid, of course, but somehow, I just can't imagine you'd be either.

So, what's the solution you might wonder. Increase the price of electricity of course. But come on people, increase the price of electricity so electricity planters can earn more money and plant more and sell more? Surely you must be cursing me by now, or haven't you noticed you'd have to pay more for my electric if you want it?

Ok, perhaps you're all nice civilised folks and don't want to curse me so let's try a different way of looking at this. Imagine Buhari removes the price control so I can sell my electricity at a market determined price like I currently sell my tomatoes no doubt at a profit high enough for me to want to plant more next year. Are you cursing me yet? I'm sure you would be if it was the subsidy on petrol I were talking about removing. Hell no! You'd likely stone me if you could get your hands on me!

Well, that's what this piece is saying where it says "The private sector is given little incentive to invest.” After all, I'm in the electric planting business for the money and the profit and not because I love you all as Adam Smith would say, so why give you light if you aren't paying me for the priviledge! And you wanna complain you're in darkness?!

When you pay me enough to cover my planting of tomatoes after paying for the land and the fertilizer and the labour and the interest on a loan and cover what I lose to theft and illegal harvesting, and still make a tidy profit to reinvest, I will plant 12000megawatts of tomatoes and I will sell 12000megawatts of tomatoes and even more megawatts of tomatoes than you can eat even because you would be incentivizing me to invest what you pay me in more land and more fertiliser and more labour to plant more tomatoes so I will have more tomatoes to sell you and make more money. But if you want cheap electric, keep your price controls and don't incentivize me but don't expect me to waste my time labouring in the sun just so you can have light because, like you, I ain't that stupid nor into the charity business!

Anyone cursing me yet, because I am telling you, we are too cheap!