Nigeria: Stop aid for privatisation

In Nigeria, where only half have access to electricity, the UK government is spending £100 million of its aid budget on a project supporting the privatisation of Nigeria’s electricity system.
Instead of benefitting Nigerians, the result has been massive price hikes, blackouts and job losses. It’s very often the same story where energy privatisation takes place.

One in five people globally live without electricity because they are unable to access it and millions more go without because they cannot afford to pay for it. Even in the UK, people are forced to choose between feeding their families and paying their energy bills. In 2013, the Big Six energy companies made £2.8 billion in profits.

In Uganda, Ghana, Nicaragua and other countries corporations have increased electricity bills after taking control of public systems – often making electricity unaffordable for those on lower wages and reducing access. In Nigeria, the government has attempted to raise prices ahead of privatisation in order to show investors there are profits to be made.

In the UK, energy prices have risen eight times faster than average earnings since 2010 while the Big Six energy companies have pocketed record profits.

Private companies prefer to serve middle class populations and industrial consumers where power lines already exist and where they can guarantee their profits, rather than expanding into slums where poorer people live. A study by the World Bank found that private companies had contributed only 11% of investment in electricity infrastructure in sub-Saharan Africa, and that most of this has been for power stations to generate electricity, rather than extending the grid into poorer areas.

Energy privatisation is associated with job losses and poorer conditions for staff. In the Philippines, unions recently won back-pay or reinstatement for 5,000 workers who were illegally dismissed when the national energy company was privatised.

Impacts of privatisation for Nigerian citizens so far have included:

Price rises – prices have been increased twice since privatisation, with another increase announced in January 2015 will be implemented in July.[i] Another tariff increase was abandoned in face of opposition and ongoing blackouts.[ii] Meanwhile, investors have been told to expect 25% returns, with increased tariffs specifically designed to attract capital. It is clear that price increases are built into the privatisation project and not just an unintended side effect, with the FT reporting in 2012 that prices would increase up to 88 per cent under reforms designed to attract outside investors.[iii]

Fixed payments – a fixed charge has been introduced, payable monthly whether users consume electricity or not, which means that people who use the lowest amount of power pay the most per unit. In 2014, following complaints about poor service, the regulator agreed that the charge would not be payable by people who experience 15 days or more days of continuous interruption to their power supply.[iv]

Problems for workers – It is estimated that up to 50 per cent of workers have been sacked by the private companies[vi] and many have not received their redundancy benefits.[vii]

Reduced investment – No significant private investment is expected, but state investment has stalled because under privatisation the private sector is supposed to provide this.[viii]

According to a review by the Department for International Development, the newly privatised distribution companies in the poorer northern states are only having half the target amount of electricity delivered.[ix]

Blackouts and reduced supply – far from improving the electricity supply, since privatisation, power generation by Nigeria’s power stations has reduced from 4,517MW in December 2012 to 3,563MW in December 2013 with seven out of the 11 power stations fully or partially shut down in January 2014 due to their owners’ inability to maintain and manage the plants,[x] and subsequent failures to secure enough gas to run them, despite the big oil companies continuing the flare gas.[xi] In January 2015 output was reported to be less than 3,000MW.[xii] The federal government alone had to budget N837m for fuelling and maintaining generators for its offices in 2014 as a result of being unable to rely on the national grid for power.[xiii]

Poor service – faced with over-estimated bills (which some people have paid and then not received the electricity they have paid for) and the distribution companies failing to conduct meter readings, many users are accepting pre-payment meters as a way to avoid overpayment.[xiv]

[i] AllAfrica (2015) Nigeria: on the increase in electricity tariff. Available: http://allafrica.com/stories/201501021581.html

[ii] PSIRU (2013) Overview of energy in Africa. London: PSIRU: http://www.psiru.org/reports/overview-energy-africa

[iii] Rice, X. (2012) Nigeria power rates to rise up to 88%. FT, 12 February 2012

[iv] Esiedesa, O. (2014) Nigeria: Electricity consumers no longer to pay fixed charge after 15 days of blackout. Available: http://allafrica.com/stories/201405010303.html

[vi] Bosah, C. (2014) One year of power privatisation: epileptic power indicates failure of privatisation. Available: http://socialistnigeria.org/page.php?article=2641

[vii] Ibrahim, K. (2014) Electricity privatisation: Electricity crisis may trigger Nigeria’s next uprising. Available: http://www.socialistnigeria.org/page.php?article=2363

[viii] Ibrahim, K. (2014) Electricity privatisation: Electricity crisis may trigger Nigeria’s next uprising. Available: http://www.socialistnigeria.org/page.php?article=2363

[ix] DfID (2014) NIAF2 annual review – summary sheet. Available: http://iati.dfid.gov.uk/iati_documents/4745841.docx

[x] Ibrahim, K. (2014) Electricity privatisation: Electricity crisis may trigger Nigeria’s next uprising. Available: http://www.socialistnigeria.org/page.php?article=2363

[xi] Bosah, C. (2014) One year of power privatisation: epileptic power indicates failure of privatisation. Available: http://socialistnigeria.org/page.php?article=2641

[xii] AllAfrica (2015) Nigeria: on the increase in electricity tariff. Available: http://allafrica.com/stories/201501021581.html

[xiii] Ibrahim, K. (2014) Electricity privatisation: Electricity crisis may trigger Nigeria’s next uprising. Available: http://www.socialistnigeria.org/page.php?article=2363

[xiv] Bosah, C. (2014) One year of power privatisation: epileptic power indicates failure of privatisation. Available: http://socialistnigeria.org/page.php?article=2641