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Nigeria’s SMEs growth achievable only with constant power supply— Report

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NIGERIA’S inclusive and diversified growth through Small and Medium-sized Enterprises (SME) can only be achieved if power supply constraints facing the sector are addressed, experts have said.

These recommendations were contained in the report of research jointly undertaken by the Center for Democracy Development (CDD) and Anti-Corruption Evidence (ACE) on Nigeria’s power sector.

“Our research recommends a disaggregated, embedded power-generating solution using natural gas as feedstock for existing SME clusters whose chief constraint to achieving competitiveness is inadequate electricity supply,” CDD and ACE said.

They further recommended that SMEs should be incentivised by the government to support the proposed strategy, adding that solutions must be developed with local political-economy considerations in mind, and not only in a technocratic manner.

“Promoting SME friendly policy will also show the Federal Government’s commitment towards delivering on the aims of the economic recovery plan laid out in 2017,” they added.

Professor Jubrin Ibrahim, a senior fellow at CDD, said the research was designed to stem the tide of pervasive and legendry corruption at all levels.

It also aims at tackling the technical inefficiencies of the grid involving gas supplies, the inability of the transmission system, poor collections of tariffs by the distribution companies, illegal connections by consumers– all of which have resulted in revenue shortfalls, causing extensive bailouts by the government.

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He recalled that the privatisation of the Nigerian electricity sector was launched in 2010 to modernise the sector and cater to the country’s growing demand for electricity.

Professor Ibrahim lamented that years later, the desired outcomes are yet to be achieved.

He said it is necessary to identify the measures and pathways that could lead to a partial solution to improving the power sector.

Pallavi Roy, Ph.D. from SOAS Consortium, University of London, said the research sought to identify effective, feasible and useful tools against corruption.

Pallavi Roy, Ph.D. from SOAS Consortium, University of London

She noted that analysis from the report suggested that anti-corruption related solutions for Nigeria’s power sector should follow a two-track approach, one for the short-to-medium term and one for the long term.

The long term strategy, Roy said, includes capital investment and debt restructuring while the medium-term strategy is focused on the most vulnerable segment of Nigeria’s economy; small and medium-sized enterprises. (SMEs).

‘’Corruption is not cultural, it is a structural phenomenon and that way we can solve issues of how resources are distributed amongst patrons,’’ she said.

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She noted in her presentation that the anti-corruption strategy adopted was a bottom-up approach to identify feasible and implementable solutions that would work within the constraints of the specific distribution of power.

“The characteristics of corruption in the Nigerian power sector are such that have been pushed to a financially unsustainable position, the interest of government-owned agencies in the sector and the appetite of donors for a big-bang restructuring is still yet questionable,” she said.

The report showed that interviews and discussion conducted in Aba, Nnewi, Onitsha and Abuja identified that most SMEs in the Southeast had to cut down on production due to power shortage compared to their counterparts in Abuja.

These entrepreneurs who invest so much in large generators and diesel were already sourcing for power through informally formal means such as-pay-as-you-go, illegal connections known as ‘’tapping’’ and also buying smuggled diesel.

SMEs account for 96 percent of businesses in Nigeria and given the nature of their operations, they are vulnerable to losses from lack of electricity supply. According to the report, 75.9 percent of SMEs lack of electricity was a major constraint for them.

Over the years, the programme to privatize Nigeria’s power sector has been one of the most ambitious market reforms in Africa, the bid began in 2005 with the electricity power sector reform acts which was formally launched in 2012 with the hope of emulating the success of the privatisation exercise in the telecommunication sector that took place in 2001, the policymakers also hoped to reduce corruption by making them more transparent and complaint by breaking the governments monopoly.

In 2012, the advisory power team rated capacity increase from 9,900 Megawatts(MW) to 12,552 MW in 2015 but over years the electricity available on the national grid to light homes and power the economy has stayed at an almost constant 4,500 megawatts(MW), well below the 8,400 MW projected in 2018, and an average of just 3,578 MW in August 2019 and has not risen above 5,300 MW since the privatization process began.

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This downturn in the power sector has highlighted accumulated losses of naira (N) 474 billion, according to a report by the French Development Agency.

‘’What we don’t compute in the cost of electricity is the very high cost of corruption and the most vulnerable are the SMEs who lose from lack of supply’’ Pallavi Roy said.

Non-state actors also amplified the fact that the power sector being regulated by Nigeria Electricity Commission (NEC) already have more than enough laws.

Ifeoma Malo executive director, power for all, who was one of the discussants stressed the need to put systems in place to regulate and hold people accountable and also ensure that power sector follows rule before expecting the private sector to come in.

Electricity is not a gift but a commodity which should be provided and also paid for. She said the only way to make policies self-enforcing is to make it beneficial.

 

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