KPMG Nigeria has made some useful suggestions to the Federal Government on how to drive development in the country’s ailing power sector. The audit giant, among other suggestions, urged the government to consider deducting, at source, the debts owed electricity distribution companies (DisCos), for onward remittance to the companies. It also said the government should continue to support businesses in the sector because of their peculiar circumstances. This, according to it, must however “be administered in a manner that guarantees improvement in power infrastructure across the country.”
These recommendations are contained in KPMG’s latest report titled: “The Twin Shocks and the Nigerian Energy and Natural Resources Industry-An Analysis of the Challenges, Consequences and Cure”. The firm wants consistency and clarity of policies on the part of government so as to encourage investments in the power sector; it wants power theft criminalised as well as codification of “coherent fiscal policy that encourages the production of renewables, mini-grids and solar home systems to the market.”
Furthermore, to ease liquidity and collection challenges, the report noted that “DISCOs may consider the introduction of bulk payment incentives to encourage consumers to invest in significant pre-payment and ease the cash flow challenges” noting, however, that this may pose a challenge “in the short term until a cost-reflective tariff or price deregulation is achieved.”
We agree with some of these suggestions. For instance, the point on consistency and clarity of policies should be well noted by the government. There must be predictability in policy decisions to attract the badly needed serious investors. We also need to diversify the sources of power generation as it has become clear that we cannot continue to rely on hydro and thermal power stations, not only because of the seemingly intractable challenges we have been having running them efficiently but also because it makes sense to look beyond them for cheaper alternatives.
Without doubt, capital is an essential factor in the running of businesses, particularly in the power sector requiring huge financial outlays. And, a major source of liquidity is payment of bills by customers. So, power consumers, be they corporates or individuals, must be made to pay for services rendered. The debt of about N98billion reportedly owed the DisCos by Federal Government’s ministries, departments and agencies (MDAs) is not good for any business. It is huge and intolerable. We therefore agree with KPMG that this money be deducted from source and paid to the DisCos, especially as it has become clear that the MDAs appear steeped in the iniquity of not picking their bills.
We say this because, as far back as the early years of the Obasanjo administration, this idea was mooted, especially concerning military establishments that were not paying their electricity bills. So, it is a culture of impunity that must be checked. These MDAs make provisions for electricity bills in their annual budgets and so, should have no excuse not to pay.
However, even as we support deduction of the debts at source, the bills must be verified. Giving also the pervasive culture of estimated or crazy billing by the defunct National Electric Power Authority (NEPA) and the Power Holding Company of Nigeria (PHCN), both progenitors of the DisCos, a practice that is still rampant, it is likely that the N98billion allegedly owed might be an exaggeration.
As a matter of fact, the immediate past Minister of Power, Works and Housing, Mr Babatunde Fashola, made this observation when confronted with the issue. In November 2016, Fashola made it clear that the Federal Government would pay only verifiable bills. He saw the advertorials carried by the DisCos titled “MDA debts not yet paid,” with sidelines such as “MDAs pay your debts so that we can serve Nigerians better,” as a blackmail against the Federal Government. “Let me say without any equivocation that government will not succumb to this blackmail, at least not the Federal Government of Nigeria,” the minister declared.
We agree with this position. The DisCos cannot and should not blackmail the government as they are doing to several hapless power consumers into paying bills they cannot justify. So, as KPMG suggested, let the government allow them to procure prepaid meters from whatever source they deem fit, ensuring however that standards are not compromised, so they can distribute to their customers for accurate billing.
We agree that the DisCos need money to expand their facilities, but this cannot justify arbitrary billing. Again, as private concerns, we do not think it makes sense for government to continue spending public funds on them.