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Market Digest Nigeria

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Punch Newspaper Headline (29th March,2019)

Dangote asks northern govs to combat extreme poverty

Tinubu urges FG to revisit power sector privatisation

  • Mixed reactions as Tinubu urges FG to revisit power sector privatisation

Stakeholders in the nation’s power sector have expressed divergent views on the call by the National Leader of the All Progressives Congress, Bola Tinubu, for the Federal Government to revisit the privatisation of the sector. The Federal Government handed over the nation’s generation and distribution companies to private investors on November 1, 2013, following the unbundling of the defunct Power Holding Company of Nigeria.

Tinubu, at the 11th Bola Tinubu Colloquium in Abuja on Thursday, urged the government to revisit the privatisation of the sector, saying the country could not afford to be too legalistic about it. He advised the government to bring experts together for a more constructive reform to improve power generation, transmission and distribution by any means necessary.

He also said the government should push for an end to the practice of estimated billing, adding that people were being forced to pay for the electricity they did not consume. He described estimated billing as “a vestige of the past that should not accompany Nigerians into the future.”

The former Lagos State Governor said President Muhammadu Buhari’s second-term administration should dedicate itself to changing the very structure of Nigeria’s economy for the better as no government had done. “The single most important sector for the government’s focus is infrastructure. The most important of our infrastructural demand is power,” he said, adding that affordable and reliable power would drive industrialisation and boost job creation.

Tinubu said, “I believe the second Buhari administration will work to increase electricity generation, transmission and distribution by more than 50 per cent within the next four years. It is a challenge we must go through and we will be held responsible for it. We require serious and bold reforms to achieve this. “What is happening to our gas pipelines? Whatever we have to invest now for our future is a task that must be done boldly. The Peoples Democratic Party administration shared out generation, distribution and transmission to their friends and cronies without very deep and thoughtful research and evaluation. It has now become pork chops.”

The Nigeria Union of Electricity Employees described Tinubu’s call for a revisiting of the power sector privatisation as a welcome development. The General Secretary, NUEE, Joe Ajaero, in a telephone interview with one of our correspondents, said, “If Tinubu is saying what we have said some years ago now, it then means that more Nigerians are beginning to see what we foresaw. The NUEE was clear about the issue of privatisation, and we never bought into it. “There was a provision for the review of the sector after five years and that was to happen in November last year, but there was a criminal silence at expiration. What is the level of investment in the sector? There should be a national debate to see whether we have made progress.”

According to Ajaero, the owners of the Discos and Gencos are still not known. The Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors, Sunday Oduntan, said, “For us, as operators in the sector, we are not really interested in the politics of power supply; we are interested in supplying power. I think the privatisation process was done openly. There was a process; they (government) even went round the world looking for investors. “The Disco investors that I represent paid a sum of $1.4bn for the entities, and we have always been talking about the challenges in the sector. For us, we will continue to cooperate with the Federal Government to ensure there is an improvement in the sector.” He said the Discos would continue to support the Meter Asset Provider scheme so that meters would be provided to all consumers.

Oduntan said, “The current Federal Government has done a lot to improve the lot of the power sector, and we have no doubt that more power will be delivered to Nigerians. And that is what we are interested in. “If revisiting the privatisation is to make sure that the contracts that were signed by the Federal Government with the investors are fulfilled, then we agree that is should be revisited. But if some people think revisiting it means taking the assets from the current investors, I can tell you that under this same situation that we find ourselves – the tariff mismatch in the sector – if you give the assets to angels, they will fail.”

Tinubu also said an increase in Value Added Tax would reduce the spending power of the people and might inflict more hardships on them. He urged the government to rather consider widening the tax net so that people who had not been paying taxes would start to pay taxes. He said, “I will appeal to Prof. Yemi Osinbajo and his team to put a question mark on any increase of VAT, please. It will reduce the purchasing power of the people which can further slow down the economy. Let us widen the tax net. Those who are not paying now, even if it is inclusive of Bola Tinubu, let the (tax) net get bigger and will take in more taxes, and that is what we must do in the country instead of additional taxes for now.”

Tinubu said in working to transform the economy, the government must also enact policies that would encourage industrialisation and modern agricultural practices. According to him, government-funded social security for the aged and government-backed affordable housing and mortgage facilities are things that it must continue to explore in an aggressive manner.

The Vice President, Prof. Yemi Osinbajo, who represented Buhari at the event, lauded Tinubu for his political sagacity. He said Buhari’s government was focused on fixing the economy and building infrastructure, adding that the administration had recorded great achievements in education and healthcare development as well as in infrastructural development. Osinbajo said, “Our country, for the first time, is experiencing the type of leadership that is bound to lead us where it is that we have purposed for ourselves as government.  In my view, the honest leadership, the leadership with the integrity of our President – President Muhammadu Buhari – is a very important component of getting anywhere at all in all our development plans. “At the last colloquium, I said that Nigeria’s main problem was not a lack of ideas; it was not a lack of projects and programmes. It was most of the time, with experience in the past, a lack of integrity in leadership and corruption in particular.

That was the reason why we were finding it difficult to make any progress and I think that was why we earned $383bn in four years, 2010 to 2014, the highest ever in the history in our country, and yet Lagos-Ibadan Expressway and Lagos-Kano Railway were not done. All the things that are supposed to be done were not done.” He added, “You cannot point to a single major infrastructure project that was completed in the 10 years period despite the high revenue, including power. So, a government coming after so many years of waste must be a government that emphasises prudence and integrity in public finance, so that they manage the little resources to achieve the maximum that can be achieved. That is what President Buhari is set out to achieving.

The Director-General, Nigeria Employers Consultative Association, Timothy Olawale, said an increase in VAT was “not good for Nigerian workers and it will also diminish the purchasing power of Nigerians.”

The Director-General, Lagos Chamber of Commerce and Industry, Muda Yusuf, said an upward review of the VAT at this time would hurt businesses, the economy and citizens. He said, “Many businesses are currently grappling with high production and operating cost, which has made sustainability difficult for many enterprises. There is also the pressure of costs driven by high-interest rate, huge logistics cost, high energy cost, and high regulatory compliance costs. “Businesses often have difficulties in passing these additional costs to customers because of the weak purchasing power by many of the citizens.  We had advocated that rather than increase tax rates, the government should broaden the tax base by bringing into the tax net numerous persons and enterprises that are not tax compliant.”

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