Are Electricity Tariffs In Nigeria

Really The Lowest In Africa? By

Africa Check
Access to electricity in Nigeria remains low and the
country is unable to produce enough electricity to meet
demand.

BY AFRICA CHECK, A NON-PROFIT FACT-CHECKING WEBSITEJUL 11, 2014

When the Nigerian newspaper Vanguard recently ran a report headlined,

Power supply: Nigeria electricity tariff, lowest in Africa, an Africa Check
reader asked us to look into the claim.
The snappy headline diverged slightly from the content of the story which
stated that, despite recent hikes, Nigeria still has one of the lowest
electricity tariffs in Africa. The story quoted an analyst claiming that:
countries like Liberia, Bukina Faso, Senegal, Mali, among others, have
higher electricity tariffs than Nigeria.

AFP/Daniel GarciaSo

does Nigeria have the lowest or one of the lowest electricity tariffs in
Africa? And is it useful to compare electricity tariffs across Africa?
What data was the claim based on?
The analyst quoted in the Vanguards article, Oludare Oduale, told Africa
Check that his claims were based on a 2005 comparative chart from a
website called the Encyclopedia of Nations. That comparison showed that
out of 22 African countries, Nigeria had the third lowest electricity tariff on
the continent.
However, this data if it is accurate is almost a decade out of date. A
more recent study, published by The World Bank in 2011, compared tariffs
in 27 sub-Saharan African countries between 2004 and 2008. It found a
huge range in the residential prices applied across the continent, but does
show Nigeria to be among the lowest for residential, commercial and
industrial tariffs.
A pointless exercise

However, Andrew Etzinger, spokesman for South Africas electricity

utility Eskom, told Africa Check that attempting to compare and rank
electricity tariffs across African was a pointless exercise.
And, according to Etzinger, having the lowest electricity tariff in Africa may
not be something to brag about.
Countries which charge more for electricity usually have proper billing
management, well maintained infrastructure and are able to provide a
reliable service, he explained.
You cant compare the experience of the average South African home with
the average Nigerian home. They are completely different.
Tariffs devoid of context
The 2011 study published by the World Bank, revealed that for average
residential consumption levels of 100 kilowatt hours per month Nigerias
tariff was 3.4 US cents/kWh and South Africas tariff was 3.6 US cents/kWh.
However, a ranking based on tariffs provides no insight into the energy
sector, the quantity of power being produced or its quality.
In 2011, South Africas population was estimated at 52 million and 85% of
people had access to electricity, according to the latest census. There has
been controversy over estimates regarding the size of Nigerias population.
But the most reliable estimates, which cross-referenced numerous
population estimates, placed the countrys population at just over 134
million in 2006. The World Bank estimates that only 48% of Nigerians have
access to electricity. A cheap electricity tariff isnt much consolation to half
of Nigerias citizens who dont have access to electricity.

If you use South Africa and Nigeria as examples, there are also stark
differences in the ability of the two countries to meet their electricity
demands. On 7 July 2014, Nigerias Presidential Task Force on
Power estimated that electricity demand in Nigeria stood at 12,800 MW,
while the country was only able to produce 3,400 MW. The task force was
set up in June 2010 by President Goodluck Jonathan to drive reform of the
countrys power sector.
In comparison, according to Eskom, South Africas electricity demand on 7
July 2014 stood at 33,604 MW and its capacity at 36,000 MW.
Although the countries tariffs are similar, Nigerias population is nearly
three times that of South Africa but it is only able to produce a tenth of its
electricity supply and is unable to meet demand.
Tariffs are too low to cover costs
Nigerias tariffs have historically been too low to cover the basic operating
costs of producing the countrys electricity.
Nigerias Presidential Task Force on Power noted that the revenues
generated by very low electricity tariffs could not even cover the cost of
producing and supplying power.
In 2009, Prasad Tallapragada, a senior energy specialist and team leader in
the World Banks Nigeria Energy Programme, noted that Nigeria had one of
the lowest electricity tariffs in the world. The tariff of about 4.3 US
cents/KWh had remained constant since 2002.
But the low tariff, together with an absence of proper metering and low
collection rates, meant that basic operating costs were not met. As a result,

according to Tallapragada, there was a yearly revenue gap that was

historical filled by government transfers.
When the lights go out
Lack of generating capacity, blackouts and voltage variations have resulted
in many residential and commercial customers in Nigeria resorting to
producing their own power with private generators.
In 2011, self-generation was estimated to produce between 4,000 and
8,000 MW. Even the conservative, outdated estimated of 4,000 MW in 2011
is more than Nigerias current grid supply of 3,400 MW.
A 2011 World Bank survey of 3,000 Nigerian business revealed that the
biggest problem they reported was unreliable power supply. Businesses
reported that they experienced average power outages of 8 hours per day.
88% of retail and manufacturing businesses survey reported owning private
generators. And the manufacturing businesses surveyed reported that
approximately 69% of their total electricity usage was produced by private
generators. The expenses incurred running private generators cost the
average business the equivalent of more than 4% of their sales.
Individuals lucky enough to be on the grid are also used to being plunged
into darkness. The Power Holding Company of Nigeria (PHCN) has earned
itself the moniker Please Have Candles Nearby.
Many houses also use generators, though it is hard to judge how much
those cost individuals to run. The cost on an individual basis fluctuates
based on size of generator, loading at any given time, fuel source (petrol is
subsidised in Nigeria, diesel is not), age and mechanical state of the

generator, says Erik Fernstrom, lead energy specialist for Africa at the
World Bank. We therefore usually use a range of 30-50 US cents / kWh for
smaller units as a broad estimate.
Conclusion Nigerian power may be cheap, but is also very
unreliable
Nigeria may have one of the lowest electricity tariffs in Africa but its not
something to be proud of. Comparisons based solely on electricity tariffs
are devoid of insightful context.
Access to electricity in Nigeria remains low and the country is unable to
produce enough electricity to meet demand.
The low tariffs may actually be hampering the upgrading of the system.
Historically, electricity tariffs have been so low that they are not sufficient to
cover the operating costs of producing the electricity.
And the low tariffs are little comfort to individuals and business who
regularly have to fork out extra money to keep their private generators
running when the lights go out.
Edited by Eleanor Whitehead
Report provided by Africa Check, a non-profit fact-checking website,
www.africacheck.org, Twitter: @africacheck.