The mistake called ‘Band A’

The principle ‘You only sell what you have’ is a cornerstone of all businesses, resonating throughout different industries and emphasising the importance of aligning offerings with available resources and expertise. It’s crucial to provide goods or services that are accessible and within one’s capabilities. However, Nigerian power Distribution Companies (DISCOs) are selling services they cannot […]

The principle ‘You only sell what you have’ is a cornerstone of all businesses, resonating throughout different industries and emphasising the importance of aligning offerings with available resources and expertise.

It’s crucial to provide goods or services that are accessible and within one’s capabilities. However, Nigerian power Distribution Companies (DISCOs) are selling services they cannot deliver to their customers. For example, the promised 20–24-hour electricity supply under the new tariffs, such as Band A, appears to be unsuccessful.

The DISCOs are simply selling 20–24 hours of electricity and darkness, causing disappointment, eroding trust, and damaging the reputation of both the DISCOs and the minister of power.

Among economics and political observers, there is a widely held belief that credibility is paramount in retail, manufacturing, or service-oriented businesses. Customers expect transparency and reliability, and any deviation from this expectation can have detrimental effects on long-term success.

• Reversing tariff increase will cost Nigeria N3.2trn in subsidy — NERC
• The burden of an ill-conceived electricity tariff increase

The DISCOs want to emulate other countries, but in those with privatised electricity, tariffs are usually categorised into residential, commercial, and industrial sectors. However, in Nigeria, consumers are simply grouped into ‘BANDs.’ For instance, in countries with reliable electricity, like the EU, consumers have the freedom to choose an electricity supplier from the full range available in their area, as well as the type of tariffs they prefer. In Nigeria, DISCOs hold a monopoly. If your service provider is Ibadan Electric, Kaduna Electric, Yola Electric, etc., you have no alternative; you must remain with that specific DISCO and the tariff band they have assigned to you.

We must acknowledge that every business, including DISCOs, operates within constraints, whether financial, logistical, or technical. While acknowledging these constraints is logical, the new tariff appears to be nothing more than an attempt to expedite Nigeria’s electricity sector development without addressing underlying challenges. How can Nigeria implement tariffs similar to those in countries with well-developed electricity sectors, characterised by massive infrastructure, reliable electricity, flexible tariff structures, and numerous options for consumers in choosing service providers?

The Band A tariff is nothing but overpromising and under delivering. Businesses that embrace this principle prioritise maximising profits at the expense of their customers’ needs and freedom of choice.

In fact, the majority of Nigerian electricity consumers, regardless of whether they are in Bands A, B, C, D, or E, are angered by two entities: DISCOs and the minister of power. DISCOs are perceived as collecting money for services not rendered, while the minister is seen as defending the indefensible.

In serious countries, electricity supplies and tariffs are considered a security and economic imperative. Thus, electricity tariffs can vary widely depending on factors such as economic conditions, infrastructure, government policies, and production methods. Presently, Nigeria’s economic conditions cannot support or sustain these new tariffs; we lack the infrastructure and economic strength for businesses to bear such high tariffs. Consequently, this would lead to high commodity prices as production costs increase, ultimately resulting in higher prices for goods and services.

In countries with efficient electricity systems, tariffs often reflect the costs of generation, distribution, and maintenance, resulting in lower rates for consumers. For instance, countries like Norway, Sweden, and Switzerland utilise a mix of hydroelectric, nuclear, and renewable energy sources, which helps keep tariffs relatively low compared to gas-powered alternatives.

The minister of power and DISCOs must revisit the drawing board as the new tariff has failed upon arrival. For instance, according to an investigative report by the Daily Trust on April 12, 2024, DISCOs issued 37 apologies to Band A customers within one week. They are struggling to sustain a 20–24-hour power supply to Band A customers.

It’s crucial to remind DISCOs of the provision by the Nigeria Electricity Regulatory Commission (NERC): ‘When the Disco fails to meet the committed service level to a Band A feeder for seven consecutive days, the feeder shall be automatically downgraded to the recorded level of supply in accordance with the applicable framework.

 

Zayyad I. Muhammad wrote from Abuja [email protected]