The Executive Vice Chairman, Alpha African Advisory, Mr. Mustafa Chike-Obi has assured that liberalization of the power sector will make it profitable, enable Nigerians have cheap electricity supply on the long run and attract over $30 billion of investment in the next three years in that sector.
Chike-Obi who was the pioneer Managing Director of the Assets Management Corporation of Nigeria (AMCON) said since it is believed that everyone deserves electricity much as everyone deserves to have telephone or nice car, the only way to lift the society to that point is to charge the people who need electricity the most, the market price.
At the monthly capacity building forum of the Finance Correspondents Association of Nigeria (FICAN), Chike-Obi threw a challenge that if the power business is made profitable, whereby tariff on electricity is removed and power companies allowed to sell to any person they wish to sell to, at market determined price, he can guarantee Nigeria a $30 billion worth of power sector investment in three years.
He explained that in some places in Ikoyi Lagos, residents get about 90 percent of power supply and they are paying roughly N50 or N60 per kilowatt hour, for instance. He said a power generating set costs about N160 per kilowatt hour with its attendant inconveniences.
According to him, “Most people who have generating set will be happier to pay N160 per kilowatt hour of electricity, but government said no. We can only charge Nigerians N60 per kilowatt hour, yet nobody has it. Nobody is looking for it and nobody is interested in more investment into it to create more power.”
“But if you allow these power companies to sell at N160 per kilowatt hour, they will make so much money from the rich people at the beginning, that they will start creating more power. Look at what happened with the telephone. At the beginning, SIM card was N70, 000 and only a few rich people could afford it and the companies made so much money. Today, almost everyone has two phones because SIM cards are free,” he stated.
To Chike-Obi, when every area of the power sector is losing money because government which owns them wants power to be supplied at N60 per kilowatt hour, it is not a good business.
According to him, all of the companies involved in power supply, owe money and will remain insolvent, even as power supply remains below expectation.
“So, you won’t get power until you realize that power is a capital good and should be priced accordingly,” the global investment expert said.
He further suggested that the major problem Nigeria has is the three subsidy regimes that are killing the economy. They are: Foreign Exchange subsidy, Fuel subsidy and Electricity subsidy.
According to him, those who believed that the fuel subsidy is for the benefit of the poor are wrong because the poor man who pays transport to work gets little or no subsidy. The average rich person in Ikoyi he said, is getting approximately a hundred times more fuel subsidy than the poor man in Somolu for instance, should subject citizens’ earnings to income test.