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The Group Managing Director of CFL Group of Companies, Mr. Lai Omotola, has taken a dim view of the recent hike in electricity tariff, saying that consumers are being made to bear the consequences of the mismanagement of the Discos.
Theadvocate.ng reported how the Federal Government, to the surprise of Nigerians, announced a hike in the electricity tariff by 300 percent recently. The new electricity tariff is now N225 ($0.15) per kilowatt-hour, compared to the previous price, which was N68.
Speaking in a press briefing on Friday at the company’s Head Office in Lagos, Mr. Omotola said that the 300% increment is extremely high, considering the massive economic hardship Nigerians are going through at this moment.
According to the financial expert, many households and lots of businesses across Nigeria would find it very difficult to cope with the increment, noting that the increment may not solve the lingering crisis in the electricity sector.
In his words, “The recent increase in electricity tariffs has left many Nigerians in shock. When the power holding company was unbounded on November 11, 2013 Many people hoped that electricity in Nigeria would improve and that Nigerians would no longer experience darkness.
“Unfortunately, 12 years after the 11 Discos were handed over to core investors, the power situation in Nigeria has not improved despite the investment.
“The increase in electricity tariff by 300% is extremely high, and one wonders how Nigerian businesses and households will survive. I am of the opinion that the 300% increment will not improve electricity in Nigeria”, he noted.
Omotola, who is also the convener of the Pro-Nigeria Group, lamented that the Minister for Power didn’t do a serious cost analysis of the Discos before arriving at the decision to increase the price.
He added that the core investors of the 11 Discos have been depending on debt to finance their projects. He identified the problems of high interest rates and funding systems in Nigerian banks, which are short-term.
“This increment has been done without first doing a cost analysis of the Discos and, secondly, looking critically into the effect of the increment on the economy.
“The core investors of all these Discos rely essentially on debt to finance the acquisitions, and many of us know in this country that interest rates are high and funding opportunities in our banks are short-term,” he said.
Taking a loan, according to Omotola, is not wrong. He, however, said that the failure of the core investors to come in with the substantial amounts of money needed for the project is the root of the problem.
He lamented that the Discos found themselves in these debts because of their finances, which have not been managed properly over the years. He noted that it is due to the poor management of their finances that made them blackmail the Federal Government into the tariff hike.
Speaking on the removal of electricity subsidy, he pointed out that the 11 Discos were sold to the core investors at an undervalued price of $1.2 billion, adding that there shouldn’t be any need for a 3 trillion subsidy payment in the first place.
Omotola noted: “There’s nothing wrong with borrowing money, but what is wrong is that the so-called core investors did not bring substantial amounts of money that belong to them, and if this does not happen, it’s a fundamental flaw in the business plan.
“Also, the financial management of the Discos has been poorly done, so, in view of this, all the Discos are in serious debt. Therefore, the only way to come out of these debts is to increase the tariff. However, the increment presupposes that the electricity consumers are the ones that are being punished for mismanagement of the discos.
“I do not see any light at the end of this tunnel. In this period of extreme economic hardship, a 300% increase will not augur well for any business, “ he added.
He called on the Discos to use the opportunity of the increment to provide uninterrupted power supply for Nigerians, as it is done in many countries. He said that they must use the money generated to build a robust and sustainable electricity network that will give Nigerians a 24-hour electricity supply.
He concluded that time will tell whether the decision to hike the price of electricity is worth it or not.
