kalokalo:

I agree with Dapo's points of view. As long as price of electricity is[b] less than cost[/b] of electricity in Nigeria, there are bound to be shortages. It baffles me how some people (like Ola olabiy, SapeleGuy) think that their ideological views on government's role in a modern economy can violate the laws of economics


By the way, electricity prices in other West African nations are more than thrice the price in Nigeria. Little wonder, its available but in short supply in Naija even though we supply some of them. Electricity shortages will remain as long as its not being run in a sustainable (profitable) way.

By the way, why is food not scarce in Naija? The government should place price controls on food and then see what happens. Shortages will occur. These are basic economics

The problem isn't about pricing, it is about corruption and generation. Nigerians  are more than prepared to pay more. Significantly more.

But, where is the generation?

@tensor777: There is a pretty good slide I read a few months ago which is a good pointer to the issues in the power sector. Of course, there is a lot more than this to it, but it is a good start:

http://www.google.com/url?sa=t&source=web&cd=1&sqi=2&ved=0CBYQFjAA&url=http%3A%2F%2Fwww.cbcglobal.org%2FCBCG_Library%2FAYO%2520Gbeleyi%2C%2520Power.ppsx&ei=WRMxTdLBCsaqlAfB0sjNCg&usg=AFQjCNHat4X8FgC4Qpx4oXEsByCstWYT8A

(The above is a 4.9 MB powerpoint presentation, so do not download if on a slow internet connection! And if you are hesitant to click the link above, you can get the same document by just googling "Ayo Gbeleyi."

The two Lagos Discos (Ikeja and Eko) look as if they'll be pretty attractive to investors.

By the way, Ghana's electricity is not owned but not run by their government, They have concessioned it for the past 16 years to a private aluminium company (Valco) and some mining concerns others to run it. Little wonder there is constant electricity because the private companies have a vested interest in providing power even though it is not their core business.

Its similar to Shell and Agip owning IPPs but imagine the whole grid is concessioned to them

kalokalo:

I agree with Dapo's points of view. As long as price of electricity is[b] less than cost[/b] of electricity in Nigeria, there are bound to be shortages. It baffles me how some people (like Ola olabiy, SapeleGuy) think that their ideological views on government's role in a modern economy can violate the laws of economics
By the way, electricity prices in other West African nations are more than thrice the price in Nigeria. Little wonder, its available but in short supply in Naija even though we supply some of them. Electricity shortages will remain as long as its not being run in a sustainable (profitable) way.
By the way, why is food not scarce in Naija? The government should place price controls on food and then see what happens. Shortages will occur. These are basic economics

True. Its okay to be ideological but not when such a position leads to poverty and bankruptcy. As I said there are no easy answers to the power supply conundrum in Nigeria as for more than 40 years it has not been run in a sustainable way.
There has to be serious consequences for the reckless manner NEPA has been run. This could mean that Nigeria never has 24 hour power supply from the national grid for the forseeable future.

tensor777:

Nope  as I don't know anything about the power supply situation in Ghana and I don't see the relevance to what we are discussing.

So giving Ghana as an example is far-fetched?

You wouldn't know about the Ghana model because you have been safely shielded from reality in Nigeria from birth.

kalokalo:

By the way, Ghana's electricity is not owned but not run by their government, They have concessioned it for the past 16 years to a private aluminium company (Valco) and some mining concerns others to run it. Little wonder there is constant electricity because the private companies have a vested interest in providing power even though it is not their core business.

Its similar to Shell and Agip owning IPPs but imagine the whole grid is concessioned to them

Concessioned? Is that privatisation? I am asking you oo. The government there modernized it, invested in it then concessioned it.

Now you are talking.

ola olabiy:

So giving Ghana as an example is far-fetched?

And your point is what? Again what is the relevance of this Ghana argument to what we are discussing or am I missing something??

Where are these guys?

tensor777:

And your point is what? Again what is the relevance of this Ghana argument to what we are discussing or am I missing something??

Ghana is a West African country with similar socio-economic difficulties.

But, they are more pragmatic.

ola olabiy:

The problem isn't about pricing, it is about corruption and generation. Nigerians  are more than prepared to pay more. Significantly more.

But, where is the generation?

Private ownership of the power infrastructure will wipe out corruption. I recall my parents paying bribes to get a phone line in the eighties and being put on a 7 month waiting list. I can't imagine a Glo employee demanding a bribe before I can subscribe to their phone services. That's what private ownership does. It reduces the incentive for corruption.

ola olabiy:

Don't tell me 50 billion is too big for our country. In fact, we can easily raise the money. But, the money will surely grow wings.

Where will we raise the $50 billion from? More importantly, how do we prevent it from being stolen?

kalokalo:

Private ownership of the power infrastructure will wipe out corruption. I recall my parents paying bribes to get a phone line in the eighties and being put on a 7 month waiting list. I can't imagine a Glo employee demanding a bribe before I can subscribe to their phone services. That's what private ownership does. It reduces the incentive for corruption.

You know I am very pragmatic. I just don't see private ownership of power infrastructure  happening in Nigeria, at least not on a nationwide scale.

@kalokalo: You carry on the good fight. Been here all day on this stuff, when I actually have work to do, lol.

kalokalo:

Private ownership of the power infrastructure will wipe out corruption. I recall my parents paying bribes to get a phone line in the eighties and being put on a 7 month waiting list. I can't imagine a Glo employee demanding a bribe before I can subscribe to their phone services. That's what private ownership does. It reduces the incentive for corruption.

Like I said, this is not about erecting masts.

It is bigger than the Telecoms.

Without the government investing in the generation side of it, no private investor will dabble into it.

These companies know that you have to cream off as soon as possible in Afriac. This means that unit costs will be initially higher than using generators for a typical household/company.

The government has to shoulder the investment necessary in the sector before these companies can come in.

eku_bear:

Where will we raise the $50 billion from? More importantly, how do we prevent it from being stolen?

Actually the first is the main issue. No foreign bank would even consider giving the FGN money for such a venture. Even the FGN's entire annual capital budget is just $5 billion

For those saying that one of the problems is electricity generation, that is partly true. BUT, it costs at least a million dollars to generate a megawatt of electricity so it would cost at least a billion dollars to build to build a gas fired power plant. The problem is that the financial institutions that would want to lend money to investors to build such power plants would first do their projections to see if was a profitable business.

In the case of Naija, the investor would operate at a loss since the government has set prices below cost for political expediency and not because of rational economics. So NO BANK would finance the building of power plants in Nigeria because the project as at this time is not bankable
Its similar to how private refinery investors cannot raise financing any where on earth to build their refineries. Now deregulate the industries and see them raise to their banks to raise money which they would now get since the business would be profitable.

eku_bear:

Where will we raise the $50 billion from? More importantly, how do we prevent it from being stolen?

Foreign banks are even more than prepared to lend to the Nigerian government.

But, the level of corruption tells us it will be stolen.

kalokalo:

For those saying that one of the problems is electricity generation, that is partly true. BUT, it costs at least a million dollars to generate a megawatt of electricity so it would cost at least a billion dollars to build to build a gas fired power plant. The problem is that the financial institutions that would want to lend money to investors to build such power plants would first do their projections to see if was a profitable business.

In the case of Naija, the investor would operate at a loss since the government has set prices below cost for political expediency and not because of rational economics. So NO BANK would finance the building of power plants in Nigeria because the project as at this time is not bankable
Its similar to how private refinery investors cannot raise financing any where on earth to build their refineries. Now deregulate the industries and see them raise to their banks to raise money which they would now get since the business would be profitable.

Foreign banks won't lend to these companies to operate in Nigeria but they will lend to the federal government.

Lets be frank, as long as Nigeria's government runs the power industry, they would continue to fail as they have for the past fifty years.  Why keep doing the same thing and still expect a different result? Let serious businessmen run the industry for profit and light would be available because they would have a powerful incentive to produce 24/7.

kalokalo:

For those saying that one of the problems is electricity generation, that is partly true. BUT, it costs at least a million dollars to generate a megawatt of electricity so it would cost at least a billion dollars to build to build a gas fired power plant. The problem is that the financial institutions that would want to lend money to investors to build such power plants would first do their projections to see if was a profitable business.

In the case of Naija, the investor would operate at a loss since the government has set prices below cost for political expediency and not because of rational economics. So NO BANK would finance the building of power plants in Nigeria because the project as at this time is not bankable
Its similar to how private refinery investors cannot raise financing any where on earth to build their refineries. Now deregulate the industries and see them raise to their banks to raise money which they would now get since the business would be profitable.

Good points BUT there are no easy answers. Truth be told it would take a very brave government to remove the subsidy and start charging market prices. It is just not going to happen. It would be political dynamite.
As for finance JUST FORGET ABOUT THAT. Even the World Bank would not finance such a money draining project.
Truth be told it is not even highly necessary that Nigeria enjoys 24 hour power supply from the national grid. There are much more pressing issues that the government should be concerned with.

kalokalo:

Lets be frank, as long as Nigeria's government runs the power industry, they would continue to fail as they have for the past fifty years. Why keep doing the same thing and still expect a different result? Let serious businessmen run the industry for profit and light would be available produced 24/7.

Ask yourself is it even worth it now. The country is just not industrialized enough to prompt such massive investment in the power supply sector.
You know it is quite possible that Nigeria would rely on a combination of NEPA power and private generators' power in the next 50 years.

tensor777:

Good points BUT there are no easy answers. Truth be told it would take a very brave government to remove the subsidy and start charging market prices. It is just not going to happen. It would be political dynamite
As for finance JUST FORGET ABOUT THAT. Even the World Bank would not finance such a money draining project.
Truth be told it is not even highly necessary that Nigeria enjoys 24 hour power supply from the national grid. There are much more pressing issues that the government should be concerned with.

That is why the electric power sector reform act of 2005 expressly shields the electricity regulatory commission from political interference so that they can approve cost reflective prices for the privatized utilities after the FG disengages from the industry which should hopefully happen this year.

The FG does not have the legal standing and power to set prices for utilities operating under the 2005 act. That is why they want to take the burden off their shoulders by privatizing.

kalokalo:

Lets be frank, as long as Nigeria's government runs the power industry, they would continue to fail as they have for the past fifty years.  Why keep doing the same thing and still expect a different result? Let serious businessmen run the industry for profit and light would be available because they would have a powerful incentive to produce 24/7.

On paper, the private sector would sort it out easily. But, this is Nigeria.

You expect these foreign companies to give kickbacks from federal to local governement level?

And have an ROI of at least 10-20 years? Are you kidding me?

These companies are ready to transmit and distribute it for you, but generate it.

You won't doo that sha.

tensor777:

Ask yourself is it even worth it now. The country is just not industrialized enough to prompt such massive investment in the power supply sector.
You know it is quite possible that Nigeria would rely on a combination of NEPA power and private generators' power in the next 50 years.

Trust me, there is a huge suppressed demand for electricity in Nigeria. Industries in Lagos alone self generate to the tune of at least 6000MW. Now consider the rest of nigeria and all the private citizens that use generators. What about all the artisans who have been driven off their trade due to no power?

NEPA power would not work because no private IPP would sell power to NEPA as they are not credit worthy. There is no guarantee that NEPA would pay them for their services since NEPA as at this time cannot recover its costs through efficient billing.

Again I am very pragmatic and not an ideologue. So what happens to people on the national grid in rural areas in urban slums .
Would these peole be cut off because I don't see how they would be able to afford the market tariff.
What about schools and colleges?

These are examples of utilities that can never function well in a corrupt country:

An efficient railway system.

An efficient airline (National carrier).

Power generation.


You can't run them in a corrupt entity.

kalokalo:

Trust me, there is a huge suppressed demand for electricity in Nigeria. Industries in Lagos alone self generate to the tune of at least 6000MW. Now consider the rest of nigeria and all the private citizens that use generators. What about all the artisans who have been driven off their trade due to no power?

NEPA power would not work because no private IPP would sell power to NEPA as they are not credit worthy. There is no guarantee that NEPA would pay them for their services since NEPA as at this time cannot recover its costs through efficient billing.

It won't happen like that as the profitable small artisans already have small generators anyway. You think those that cannot afford these would be able to pay the market tarrifs every month.?
Are you so sure that the cosst of generatiion would be more than the market tarriff. No.
The main reasons why this will not work is simple poverty and chaotic infrastructure. not corruption as some people here rigidly believe.
It is very different in the west which is very rich, fully industrialized and politically stable. What would be their return on investment and payback period by the way?

tensor777:

Again I am very pragmatic and not an ideologue. So what happens to people on the national grid in rural areas in urban slums .
Would these peole be cut off because I don't see how they would be able to afford the market tariff.
What about schools and colleges?

How it will work is that tariffs will be set according to use. So the more you use, the more you pay(on a prepaid platform) For instance the first 20 units of electricity will be charged a low base rate which is useful for very minimal use. If you use more than that, then you start to pay big. So the poor will be able to afford the baseline tariff

However everyone would now have a powerful reason to conserve electricity usage since wasting it means wasting money while those that really need the electricity e.g. industries would get it (at a higher price of course due to industrial use)

Schools and colleges would have to pay commercial rates for their use.

ola olabiy:

These are examples of utilities that can never function well in a corrupt country:
An efficient railway system.
Power generation.
You can't run them in a corrupt entity.

What are you on about?
Definitely Nigeria should forget about an efficient railway system and 24 hour power supply but not because of corruption as you rigidly believe but poverty and underdevelopment and chaotic infrastructure. Its not everything the West has that Nigeria should copy and this is one of them
No rational investor would even consider investing in such white elephant projects. It has nothing to do with corruption.

kalokalo:

How it will work is that tariffs will be set according to use. So the more you use, the more you pay(on a prepaid platform) For instance the first 20 units of electricity will be charged a low base rate which is useful for very minimal use. If you use more than that, then you start to pay big. So the poor will be able to afford the baseline tariff

However everyone would now have a powerful reason to conserve electricity usage since wasting it means wasting money while those that really need the electricity e.g. industries would get it (at a higher price of course due to industrial use)

Schools and colleges would have to pay commercial rates for their use.

Any figures behind your terms. That is crucial as you should know . Yeah a good product but what is the price?

tensor777:

What are you on about?
Definitely Nigeria should forget about an efficient railway system and 24 hour power supply but not because of corruption as you rigidly believe but poverty and underdevelopment and chaotic infrastructure. Its not everything the West has that Nigeria should copy and this is one of them
No rational investor would even consider investing in such white elephant projects. It has nothing to do with corruption.

And, what is the reason for underdevelopment and chaotic infrastructure?

Not corruption?

Even Gabon maintains a rail system. No matter how 'old-school'.