Nigeria’s Power Privatization is an Economic Dead-end
The continuation of: Nigeria’s Power Privatization is an Economic Dead-end
In cement production, the so-called privatization and involvement of private investors have not led to access to cement for millions of working class and even middle class, as the price of the product is more than 4 times the price in the international market (N400). This is despite the huge concessions including favourable trade policies like tax holidays, reduction/removal of tariffs and duties, and privatization, at rock bottom prices, of state owned cement companies to private investors. Currently, there is overcapacity in the cement industry as the cost of cement is simply inaccessible to vast majority of the population; meanwhile, there is 15 million housing deficit.
Privatization and the Crisis of Global Capitalism
These realities are products of the precarious stage of world capitalism in its neo-liberal phase. Thus, it is not accidental that private investments in the power sector have not led to improved access. In fact, according to World Bank, less than 10 percent of the investments in power generation in Africa come from private sector, with most of the private investments being in small-sized IPPs (independent Power Projects), which in many cases are used for their (private companies’) internal operations. More than this, many of the IPPs are gas-fired, which makes them very expensive and environmentally unfriendly unlike hydropower and other choices; hence the exorbitant tariffs charged by the private investors.
This failure of private investment, and indeed privatization itself is a manifestation of the precariousness of capitalist neo-liberalism. With the unleashing of neo-liberalism as the latest phase of capitalism since the mid-1980s, global capitalist investors have sought super-profits to recover the losses during the welfare state era. Consequently, there has been increased drive to extract more profits from the working masses. This has meant takeover of the global economy, including the productive sectors, by venture/financial capitalists, who use their finance capitals (through stocks, equities, bonds and loans) to demand for increasing profits. While this may work for sometimes, it has accentuated the boom-bust cycle of capitalism, as reflected in the current global economic depression, which started in 2007, and has refused to go away. Thus, as capitalism is in greater risk than ever, investors will seek for quick profits and increased exploitation, as a way of guaranteeing their capital.
On this basis, capitalist investors, both local and foreign, are basically not interested in developing any economy, especially a third world economy, where huge capital investments requiring longer gestation periods are needed for genuine sustainable development. Their aim is to feed predatorily on the miseries of the people, and the carcass of mismanaged state economies. Meanwhile, at the slightest instance of risk, they withdraw their capital as reflected in 2008 when foreign portfolio investors, in response to global meltdown, withdrew their investments worth over $4 billion in the Nigerian capital market within months, triggering the collapse of the already unstable cum ballooned stock market, and subsequently the banking system. It is therefore funny at best the expectation of bourgeois pundits that private capitalist investors will develop the economy, even when reality starkly stare them in the face.
Governments, having bought into the neo-liberal ideology, have become slaves to global capitalist big business. This is exacerbated by the weak and rent-seeking nature of Nigerian nay, African ruling and capitalist classes, who are not productive, but live on the rents and royalties gotten from multinational corporations who technically control the local economies. It is thus not accidental that the Nigerian power sector is seen as a cash cow and easy source of wealth by all sections of Nigerian capitalist class – both in the politics and big business.
For instance, various elements in governments had to embark on bitter struggles in order to get part of the PHCN cake, which led to the disgraceful removal of the power minister, Barth Nnaji, whose company, Geometric Power, was part of a bidding consortium for one of the power plants. While, he was supposedly removed because of clash of interests (as he sat on the board that superintend over the auction of the power plants), there are newspapers’ reports suggesting he was removed because other politicians felt betrayed by his attempt to shortchange their own companies from the juicy auctions.
For instance, the vice president, Namadi Sambo, who chairs privatization of state assets, has his company also involved in the PHCN companies. Indeed, the peak of the struggle was when four state governors (Edo, Delta, Ekiti and Ondo) openly rejected the privatization of one of the distribution companies – Edo Distribution Company. The governors claimed that the companies they floated, Southern Electricity Distribution Company, was shortchanged by the BPE (the agency that organizes state auctions) in the sale of the distribution company. In the real sense, these governors are only fronting for private investors, as the four states only collectively control minority shares in the company, with little or no managerial power. Surely, Nigerians should prepare for monumental catastrophe with the privatization of the nation’s power sector.
Implication of power privatization for the working and poor people
To those who have illusion in power privatization, one can only sympathize. Privatization means turning power to business commodity not a national developmental policy. The private investors will, on the basis of the operation of global capitalism first cannibalize PHCN properties to pay off immediate debts and loans to reduce interests and indebtedness, and give immediate profits to venture capitalists to sustain their confidence. The government is already simplifying this for them by undervaluing PHCN properties, worth hundreds of billions of dollars. Then, they will scale back operations to profitable ventures. This will mean our villages, streets, communities, businesses; etc may be cut off from the grid if supplying them will not generate enough profits. This is necessary to build investors’ confidence and hike rate of return.
This arrangement will then be used to hike the tariff so high that only a few can dare to have power for long even with the electronic meters. This will reflect in cost of running businesses and cost of living. The argument is simple: if you cannot afford the cost, try generator (remember the cliché “if education is costly, try ignorance”?). Meanwhile, under the current arrangement, although supply is poor, you can still relatively afford it. Under privatized arrangement, you either pay or live in permanent darkness. With this, many communities and businesses will be cut off.
Moreover, unlike PHCN under public ownership, where repair and provision of electricity facilities is seen as public responsibility, with government held accountable; the main policy of the private investors will be profit maximization, and the operating mechanism will be demand-and-supply. The reality in the telecom sector is only a child’s play.