Calls for auditing and legal action against defaulting electricity meter manufacturing firms in the country rang out yesterday as stakeholders questioned the Federal Government’s bid for a $155 million World Bank loan to import meters as it works to close the country’s 8.1 million metering gap.
The stakeholders also recommended the World Bank to decrease its expectations of the country’s energy industry under the Federal Government’s National Mass Metering Programme (NMMP).
While over 8.1 million households in the country are without meters due to arbitrary billing, local meter manufacturers under the Metre Manufacturers and Assemblage Association of Nigeria (MMAAN) insist that the World Bank’s conditions for the implementation of the second phase of the NMMP would kill local industry in Nigeria.
Almost a year after the Central Bank of Nigeria (CBN) was reportedly forced to withdraw legal action against some meter companies, primarily indigenous firms, for their roles in short-changing Nigerians under the first phase of the programme, some stakeholders yesterday insisted that while local industry protection must be respected, auditing of the first phase of the NMMP was also critical. They also stated that legal action must be taken against defaulting corporations and people in order to clean up Nigeria’s electrical industry.
To appease Nigerians following the Service Based Tariff (SBT) increase in electricity tariffs, the former administration of former President Muhammadu Buhari disrupted the existing arrangement of the Nigerian Electricity Regulatory Commission (NERC) through Metre Asset Providers (MAPs) and introduced the NMMP, which aimed to provide free meters to consumers.
While local meter businesses apparently invested to satisfy the demand posed by the MAPs, the previous administration enforced the NMMP with approximately 800,000 metres given rather than the over five million that would have been provided by now if the program had lived up to expectations.
However, MMAAN, which had initially asked NERC to raise the price of prepaid meters from N58, 661.69 to N117, 323.38 per unit, and three-phase meters from N109, 684.36 to N219, 368.72 (excluding VAT), reacted angrily after the World Bank published its bid for the second phase of NMMP.
In a recent letter to the Bureau of Public Procurement (BPP), the association urged that the World Bank-funded bid process be immediately halted, claiming that the move would jeopardize over $500 million in sector investments.
Ademola Agoro, Acting President of MMAAN, urged the Bureau and the government to save the local metering industry, as well as Nigerian investments and jobs, from catastrophic collapse.
“If the tender, which closes on July 11, 2023, is allowed to continue, it will amount to a constructive breach of the award of contract(s) for the supply of four million metres under Phase One of the programme, which has already been awarded to some of our members by Transmission Company of Nigeria (TCN) since November 2022, a bid process that BPP approved.”
“You (BPP) may be aware that the TCN recently advertised a World Bank-funded bid process for the supply of 1.2 million smart meters to Nigerian distribution companies.” “Please make your office aware that this particular bid process is being opened to foreign companies (manufacturers, suppliers, and exporters) of fully built electricity meters, with a planned Custom duty waiver granted to them to import meters into Nigeria,” Agoro stated.
According to the Guardian, on July 10, the meter manufacturers got a court injunction stopping the bidding process from a Kano High Court. The bank was compelled to reschedule the bidding procedure, which was supposed to be an international process, to July 21 in the hopes that the case would be resolved before then.
According to the Guardian, the NERC called an emergency meeting in response to the development, citing its role in the court injunction as well as the fact that the manufacturers did not consult the commission before submitting the case.
According to meeting sources, despite the fact that the session was rowdy, the players made progress and would convene another meeting in the coming week as the World Bank may bow to pressure to align its plan with local realities, particularly the Federal Government’s backward integration, which prioritizes local manufacturing over importation.
While the World Bank was looking for an international bid, some manufacturers told The Guardian that none of the local manufacturers would be able to meet the bank’s conditions, adding that while the bank would have gotten the meters for much less than most local companies were offering, it would kill the local firms that had been frustrated by the government’s policy inconsistency.
While the poor deals perpetrated by some of the meter producers in collaboration with industry players had deterred the CBN, The Guardian learned that most of the genuine manufacturers had been loaded over 18 months with volumes of metres stacked in their warehouses.
Prof. Wunmi Iledare, former President of the Nigerian Association for Energy Economics and Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management at the Institute for Oil and Gas Studies, University of Cape Coast, stated that local businesses must recognize that the business world is a global village.
“Local service costs cannot be higher than import parity prices in the future,” he stated. I’ve long maintained that the Local Content Act is not a license or a mandate for low-quality, high-cost local supply of goods and services. With enhanced global supply chain management, global competitors are now within reach.”
However, Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria (CIBN) and Professor of Economics at Babcock University, who described the slow pace of metering since the division of the electricity sector into generating, transmitting, and distributing segments, noted that local metering companies have not met expectations.
According to him, if there was any issue louder than the norm in the sector today, it was the lack of prepaid meters.
“And it appears that all of the operators are enjoying the situation because it allows for the option of estimated billing, which consumers see as a rip off.” The Central Bank’s uproar the other time highlighted the ineffective template that local metering companies are using,” Ajibola stated.
Noting that the power sector’s monopoly has bred inefficiency, Ajibola stated that while electricity consumers battle to have prepaid meters installed in their homes, offices, and commercial premises, “local suppliers are failing them.”
He chastised the NERC for its regulatory failure, claiming that local manufacturers’ concerns were not entirely unfounded, as Nigeria needed to create local capacity for producing products such as meters.
“One way out is to set realistic deadlines for local manufacturers, failing which the monopoly of local manufacturers could be broken,” he warned.
Ameh Madaki, an energy specialist, believes it is inappropriate for the country to import power meters when it has the potential to create them locally.
“Local manufacturers were encouraged to establish costly plants to manufacture the meters, and without patronage, those investments will be stranded.”
“It is not rocket science to produce electricity meters, and the key to our economic recovery and the strengthening of the naira against the dollar and other international currencies lies in our looking inwards to patronize local businesses and improve their capacity to compete.” “We must work hard to keep jobs here and improve the quality of goods produced locally,” he said.
Prof. Adeola Adenikinju, an energy scholar at the University of Ibadan, argued that the country should boost indigenous producers while asking for required legal action if the meter businesses were found wanting in the previous metering plan.
“That is the only way to guarantee jobs and build local capacity.” Foreign producers, on the other hand, should be encouraged to set up shop in Nigeria. The World Bank and other international funders should collaborate with Nigeria to strengthen local capability. Nigeria will eventually pay back this money,” he stated.
Chinedu Amah, founder of Spark Nigeria, believes the initial phase of the mass metering initiative should be audited.
According to him, the problems associated with the failed first phase could not be buried. He stated that the government could not move on to phase two of the initiative without first investigating why phase one failed.
“We must define the true demand for metering and ensure that local manufacturing can meet it.” “It would be an aberration to turn to international firms for our local metering if local manufacturing can meet the demand,” he said.
Amah argued that the Federal Government must recognize that its mission should be policymaking in order to strengthen local capability and create jobs, rather than seeking easy answers to problems that can be handled locally.
Meanwhile, energy customers may have to pay more in the coming days because 11 DisCos applied to the Federal Government through the NERC yesterday for a review of their pricing.
This was stated in a joint application dated July 14, 2023, titled “Notice of Application for Rate Review by the Electricity Distribution Companies,” which the NERC made public yesterday.
The energy distributors justified their rate increases by citing the necessity to account for changes in macroeconomic parameters and other variables influencing the companies’ quality of service, operations, and sustainability.
“Pursuant to Sections 116 (1) and 2(a&b) of the Electricity Act 2023 and other extant rules, the 11 successor electricity distribution companies (“DisCos”) have filed an application for rate review with the Nigerian Electricity Regulatory Commission (“NERC” or the “Commission”),” the letter reads in part. The request for a rate review is based on the necessity to account for changes in macroeconomic parameters and other factors impacting the companies’ quality of service, operations, and sustainability.
“As a result, the Commission hereby invites the general public to submit comments on the distribution licensees’ rate review applications.” Interested parties are encouraged to read and analyze the extracts from the Rate Review Applications filed with the Commission by the respective licensees.
“The applications are available at the Commission’s website, www.nerc.gov.ng.”
“Before making a ruling, the Commission shall conduct a Rate Case Hearing on the applications as part of the rule-making process and in exercise of the powers conferred by the Electricity Act.” Anyone interested in participating in the proceedings as an intervenor should submit an application to email@example.com before the close of business on July 20, 2023. The following information must be included in the Request to Participate: i. An explanation of the party’s interest in the proceeding and how the outcome of the Application might affect the party; and ii. A summary of the party’s concerns, observations, comments, and/or objections to the application.
“All members of the public and stakeholders are encouraged to send their comments or representations to the Chairman/CEO, The Nigerian Electricity Regulatory Commission, before the close of business on July 20, 2023.”