THE EXPECTED ROLE OF THE REGULATOR IN MAKING THE

CONSUMER “KING” IN THE NIGERIAN ELECTRICITY MARKET

– A PAPER PRESENTED BY ALHAJI BASHIR M. BORODO, MFR,
PRESIDENT OF MAN AT A ONE-DAY NATIONAL CONFERENCE
ON ELECTRICITY CONSUMERS IN NIGERIA HELD ON
WEDNESDAY, 14TH MARCH 2007 AT THE SHEHU MUSA
YAR’ADUA CENTRE, ABUJA.

INTRODUCTION

There is no doubt that Electricity supply is one of the key and major
input to the process of economic development in any nation. It is
also one of the cardinal factors needed to drive productivity in
Industry and general growth in the economy. Electricity power
supply has always been one of the Barometer for measuring the
industrial and Economic development of any nation.

This Conference is timely, and we congratulate the Nigerian

Electricity Regulatory Commission (NERC) for deeming it fit at this
stage to have a national discuss on the role of the Regulator in
making the consumer King in the Nigerian Electricity Market.
Overview:
Perhaps it is necessary to have an overview of the Electricity power
situation in the country as it compares with the other countries of
the world to enable us understand the extent of power situation in
Nigeria.
(i) USA
Population: 300 Million
Installed Electricity Generation Capacity: 900,000 MW
Peak Demand: 800,000 MW

(ii) China
Population: 1.3 Billion
Installed Electricity Generation Capacity: 650,000 MW
Peak Demand: 405 GW

(iii) U.K
Population: 57 Million
 Installed Electricity Generation Capacity: 74,000 MW
Peak Demand; 55,000. MW

(iv) South Africa

Population: 40 million
Installed Electricity Generation Capacity: 42,000 MW
Peak Demand: 38,000 MW

(v) Nigeria
Population 140 Million
Installed Electricity Generation Capacity: 10,000 MW
(Projected 2007)

Current Generation Capacity: 2000 MW (Less)

National Estimated Demand: 7,000 MW
Real Electricity power demand: 25,000 to 45,000 MW (OPS
conservative estimate)

From the above, you will easily observe that electricity power
generation and supply in Nigeria is grossly inadequate.
Consequently, industries rely more on in-house generated electric
power to sustain their businesses. A recent survey conducted by
MAN between 2004 and 2006, revels that PHCN supplied only
41.7% of total energy required by manufacturers while 58.3% was
generated in-house through other sources of electricity generation.
This in all cases cost about three to four times more than PHCN
tariff.

The negative effect of poor electricity supply to industrial activities

cannot be over emphasized. Records show that between 25% to
29% of manufacturers production cost goes into provision of
electricity power supply. This is apart from other additional costs
that have to be incurred as a result of the deficiency in the other
basic infrastructures. These has placed manufacturers at great
competitive disadvantage and made investment into the real sector
unattractive.

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The simple demand and supply economics has therefore made the
duty of the Electricity Regulator a daunting one.

To be at par with other developing nations like the Asian Tigers,

and perhaps South Africa, within our own Continent, we need an
installed electricity Generating capacity of a minimum of 90,000
MW as against the proposed 10,000 MW currently being pursued by
Government. Bridging this gap will require huge investment in
infrastructure, power plants etc over a sustained period of time. It
will require all hands to be on deck.

We in the Manufacturers Association of Nigeria are aware of the

enormous investment and efforts the Government has already put
in and are still putting towards bridging the power gap in our
Country, we deem it fit and necessary at this stage to contribute in
our own little way towards this. Details of this will be put forward to
NERC as soon as our feasibility studies are concluded.

Expected role of the Regulator in Making the Customer

“King” in Nigerian Electricity Market

In view of the current situation of electricity supply to consumers in

the electricity market, MAN recommends that the role of the
Regulator in the market should be the following:
1. Provision of incentives suitable to attract investment into the
power sector, in the following areas:
a. Land: Assist investors in the sector to secure suitable land
and sites for their projects.
b. Import duty concession on imported machines, parts,
tools and Equipment to be used by investor in this sector

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 c. Tax holidays for at least 15 to 20 years. Tax free dividend
to shareholders of investment companies in the sector.
d. Granting of capital allowance: Giving other special
grants to firms that complies with specific requirements, as
it is common in the developed world.
e. Encourage and support local industries (SMIs) to
invest in the sector as support industries for the
manufacture and supply of parts and accessories for use
by the sector’s operators. In this respect MAN could play
the major role of identifying such companies and proposing
the nature of incentives necessary to drive such industries.
f. The designation of pioneer status to the new power
industry should be total and in did a clarion call to the
private sector to invest in the power sector by all those
who have the capacity and interest to do so.

2. Ensure that the customer is not over-burdened with high tariff

charges. In this light the introduction of the new prepaid
meter is supported by MAN and in the right direction.
However, the new industrial or panel meter which now
transfers the power loss from transmission to the industrial
consumer is not in the interest of the consumer. It only goes
to further aggravate local production cost of the industry.

Conclusion

Finally, The Manufacturers Association of Nigeria (MAN), would like

to reaffirm her unwavering commitment and support to the growth
of the private sector and its shared vision with government on the
direction, and momentum of the Nigerian economy.

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The on-going reform of the power sector would further enjoy the
support of manufacturers, if properly implemented and effectively
managed. This would also contribute to the positive turn around of
the manufacturing sector energy requirement in the near and
medium terms.

To continue to ensure efficiency in the power sector, MAN wishes to

further recommend the following:

(a) That the implementation of the on-going power sector

reforms be aggressively pursued for adequate service
delivery.
(b) The need to include in the country’s energy Masterplan,
the utilization of renewable energy resources for power
generation such as Coal, Solar power, wind power and
hydropower should be considered.
(c) More aggressive policy measure should be put in place to
eliminate the concurrent vandalization of infrastructure
facilities in the country particularly, in the Niger Delta
region. We recommend that this thorny issue should be
quickly resolved politically.
(d) The propose hike in tariff by PHCN should be put on hold
as there is no justification for this at this present time
when the citizens and industries are not enjoying more
than 40% of power supply from PHCN.

MANUFACTURERS ASSOCIATION OF NIGERIA 14TH MARCH 2007