Nigeria’s Power Privatization is an Economic Dead-end
The continuation of: Nigeria’s Power Privatization is an Economic Dead-end
In fact, since 2006 World Bank had given a credit support of over $781 million for investment in power generation, transmission and distribution, and gas supply. This credit, which is being guaranteed by the Nigerian government, is expected to ensure at least 25 percent profit for private investors. This means that if the investments fail, government will bear the cost with public fund i.e. while the public insure the business of private sector, the profit made is cornered by the private sector. Even at this, the so-called credit facilities will at best allow private investors, both local and foreign to continue operations at current level, and not expand the facilities.
Of course, there are reported plans to use part of the Pension fund, estimated at close to N3 trillion, or bank loans to fund the power sector. The reality is that, this can only be a mirage; and if it comes to reality, it will never resolve the power problem as it will be mere a drop in the ocean. Even, if it is used, the catastrophe it will generate can only be imagined.
In the first instance, the use of pension fund, which itself is extortion from workers, shows the weakness and the predatory character of capitalism, and capitalist big business. Secondly, according to WEO report, close to a trillion naira (N9.2 billion) is needed yearly in investment for the next ten years to provide universal access to all households. This means N9.2 trillion will be needed to provide universal access for all Nigerians in the next ten years. This is more than three times of the total pension fund. Removing just one tenth of this amount from the Pension fund, will lead to serious problems for not only the pension system but also Nigeria’s economy.
For instance, majority of Nigerians are considered poor (over 70 percent), which will make recouping of investment from consumers highly difficult. Meanwhile, the debts will be accumulating, leading to hike in tariff cost and negative spiral effects on consumption. Added to this is the fact that pension fund is not a fixed capital; population of pensioners will continue to rise, leading to increase in claims. This will even add to hike in cost of borrowing for not only the power ‘investors’ but also for manufacturing sector, and other sectors of the economy thus crowding out other sectors of the economy from accessing funds,. Failure to recoup the investment will therefore lead to the deflation of the economy across all sectors.
The so-called foreign investors, in this circumstance, will abandon such investments or partnerships, leading to total collapse of the not only the power sector, but also other sectors of the economy, particularly the already ailing manufacturing sector.
The failure of Previous Privatizations and Deregulation
This has been the lot of several privatized public enterprises – NITEL, MMIA 2, Nigerian Airways, concessioned Lagos-Ibadan expressway, Steel Plants, etc. In these examples, the banking sector, itself bedeviled with crises, could not lend to investors because of the high risk of losing investment. In areas where loans were accessed like the MMIA, and Nigerian Airways, the investors could not recoup investments with the rising interests; therefore, there was either unraveling of the privatized firms (Nigeria Airways, later Virgin Nigeria/Air Nigeria) or hike in cost of service (MMIA).
In many cases, the private buyers of many state enterprises only abandon these firms, only to use them as collateral for other business. An example is the Osogbo Steel Rolling Company, bought by Dangote, which has been left idle for more than six years. The company is now used as offloading depot for Dangote products like cement. Thus, it is no accident that more than eighty percent of the privatized firms have been declared to have failed by no other person than Namadi Sambo, Nigeria’s vice president and chair of the National Council on Privatization (NCP), the highest decision making in the privatization racket. Yet, Nigerian government wants to hand over such strategic aspect of Nigerian economy, the power sector, to venture capitalists.
The main example used to justify privatization and other neo-liberal policies is the assumed ‘successes’ of the privatization of telecommunication sector. Of course, there has been liberalization of telecommunication services with estimated over 100 million active mobile lines and several mobile phones in existence.
In addition, many Nigerians now have access to various communication services including internet access. This is against the experience when the state was in monopoly control of the sector through NITEL. However, this is just one side of the story. The so-called 100 million lines mask the real percentage of Nigerians having access to mobile telecommunication. In reality, only less than half of this number is the actual population of Nigerians having mobile lines, as most users, based on the erratic nature of telecommunication services keep more than one (sometimes more than two) lines. This means, in a population of over 160 million, just around 60 million Nigerians, constituting just 38 percent of Nigerians. If it takes thirteen years for mobile telecommunication to get to less than 40 percent of Nigerians, despite huge government’s concessions (e.g. five year tax breaks), it will be going to eternity for the so-called private investors in the power sector (a bigger and more capital intensive sector) to provide electricity for every household in Nigeria?
This is coming on the heel of the fact that telecommunication service in Nigeria is one of the costliest in the world. Of course, there have been complaints by service providers that cost of operation is high, especially energy cost; however, this has not stopped them (the service providers) from amassing unprecedented profits. For instance, one of them was reported to have made revenue of over a trillion naira, with at least 30 percent of this being the profit. Indeed, the leading telecommunication service company in Nigeria, MTN (a South African company with close to 40 percent of investment in Nigeria) has the highest share price in Africa, yet millions of helpless Nigerians continue to groan under high cost and poor service.
It is worth stating that the state telecommunication company, NITEL was run down by politicians, big bureaucrats and big business people, many of whom are currently playing one role or the other (as investors, technical partners, etc) in private companies succeeding it. While NITEL was supposedly public-owned, it was run, more or less like private fiefdom of these big bureaucrats and politicians, who use their appointments to serve the private interests of their patrons in the corridors of power and big business.
Indeed, MTEL the mobile telecommunication of NITEL was deliberately run aground by these people, while the private companies were given many mouth-watery perks. By 2006, Pentascope, a foreign private company that was contracted to manage NITEL had ruined both NITEL and MTEL with billions of naira looted from the companies, coupled with accumulated debts. The company was able to get away because it has as partners, elements in governments and big business. Indeed, many private companies were, in a Senate Communication Committee Hearing on NITEL in 2009, reportedly involved in duping NITEL of billions of naira, by manipulating its facilities, in collusion with some officials of NITEL. Indeed, the telecommunication service providers were reported to have owed the company of over N80 billion of unpaid fees for using its infrastructures and services.