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Nigeria’s electricity privatization

The ominous signs and the case for working people’s opposition

D 14 septembre 2013     H 05:37     A Kola Ibrahim     C 0 messages

Like every house built on fraud, the attempt by the Nigerian ruling class to privatize Power Holding Company of Nigeria (PHCN) and the electricity sector is already falling flat. Of course, without principled opposition by the working masses, led by their unions and other pro-masses organizations, the current privatization of electricity utility company is bound to worsen the living conditions of the working and poor people. As we said in an earlier write-up on this privatization :

“…The privatization of the electricity sub-sector has nothing to do with solving the horrifying experience Nigerians have been made to go through with the virtual collapse of electricity infrastructures ; itself caused by the deliberate plundering and sabotaging of the corporation by the capitalist class in both big business and politics. It is, on the contrary, a means by which big businesses across the board, both local and foreign, plan to profit from the misery and frustration…of Nigerians.”

The labour unions, especially Nigeria Labour Congress and Trade Union Congress, must build a mass movement to reverse electricity privatization. Against the mismanagement and cronyism associated with the publicly-owned but bureaucratically- and corruptly-run PHCN, which has meant virtually looting of all monies budgeted for the corporation and the sector by the corrupt political elites and big business, labour movement leadership must advocate democratic public ownership and management under the elected representatives of workers, communities, consumers and relevant professionals. Against the impending astronomical hike in tariff and cut-off of communities from supply, which will accompany this privatization, labour movement must build a mass movement against the massive fraud called electricity privatization.

The drama that accompanied this process of payment has further underscored the fact that power privatization is already a failure from the standpoint of national development. This is aside the fact that privatization, by its design and philosophy, is robbery of the poor in the interest of the rich few. The fundamental objective of private business is profit maximization which can be made through exploitation of workers and general consumers. This is made worse by the primitive accumulative character of Nigeria’s capitalist class, which relies on state handouts.

According to the Guardian of August 19-22, 2013, in the run up to the deadline for completion payment, the bidders for the ten distribution companies, under the Disco Roundtable, had wanted among other terms : a 5-10 years tax holiday from government and remittance of MYTO subsidy fund to them even when they have not started operation, and a government guarantee of bank loans to them. The bidders for the distribution companies at the end of the process are expected to have paid $1.55 billion (about N250 billion). By giving them just a five-year tax holiday, the government will in effect be giving them more than they paid for the privatized companies. With government clearing the debts of PHCN and retrenching thousands of workers, coupled with the hike in tariffs by around 100 percent, the coast is clear for the private buyers to make unhindered big bucks. This is aside over N360 billion given to the Nigerian Bulk Electricity Trader (NBET), to help pay for electricity supplied to privatized distribution companies, in case they default. Yet, these buyers still wanted more.

If you feel that this fraud is about the distribution companies alone, they you are in for a shocker. Three of the newly built generating plants – Geregu 1, Ughelli and Sapele - costing about N300 billion were sold for less than N100 billion. Furthermore, the governments at all levels have concluded plans to sell off the ten new power plants built under Niger Delta Power Holding Company (NDPHC). These plants were built with a total cost of over $8 billion, but as previous sales and analysis above have shown, they will merely be Christmas gifts to the so-called private investors. The private license holders, most of whom have not generated any megawatt, are lobbying to participate in the purchase of the new plants. Meanwhile one of the excuses of government for the mindless privatization is that public corporations have become drains on government, and are not profitable. Yet the same government is committing public resources to ensure private profit making.

But, it could not have been different. The so-called private investors are gangs of politicians, their big business collaborators and international finance backers. This is reflected in the manner in which public officers and big business people change roles. For instance, the spokesperson for the Disco Roundtable is a former chairman of Nigerian Electricity Regulatory Commission (NERC) – the agency that is meant to regulate electricity sale process – Ransome Owan, while the head of the IPPAN, the lobby group for so-called independent power producers, is the former minister and strategist in various governments, Prof. Jerry Gana. In fact, previous privatizations featured many private companies owned or partly owned by past and present government officers, including generals, ministers, president, vice president, etc. Therefore, the privatization process has been nothing more than Christmas gifts actually to the same people selling.

More than this is the fact that these private buyers only rely on expected loans to run these privatized companies. Meanwhile, banks and financial houses were only ready to grant loans for these private buyers to pay for the privatized companies, on the basis of government insuring their loans, and securing profits. As expected, this will mean high interest rates which can only be covered by massive hikes in electricity tariffs. It will mean cutting operation costs which can only be achieved by reduction in workforce and concentrating operations on the most profitable areas of the privatized companies. This will imply that the current erratic power supply will worsen for most areas, especially where revenues are low. This is already on stream with the introduction of pre-paid meters, whose cost is priced out of the reach of most Nigerians. Unlike under publicly owned PHCN, the current arrangement will mean more problems for consumers than ever, especially in terms of customer services. The question of repair and replacement of facilities, for example transformers, will depend on whether the affected area can generate enough profit or not. Surely, the privatization, rather than resolving the erratic nature of and inaccessibility to electricity, will worsen the problems.

It will indeed create more problems. As said earlier, the buyers are weak economically to commit huge resources for long term investment or future profit making. In fact, global capitalism, on the basis of current neo-liberal arrangement, is not interested in long term investment ; at least not in the third world economies with their fragility and political instability. Therefore, electricity privatization, rather than expanding electricity infrastructure, will actually shrink access to electricity, presently put at about 40 percent of the population. According to International Energy Association (IEA) 2010 World Energy Outlook Report, around one trillion naira is needed yearly in investment for the next ten years to provide universal access to all households in Nigeria. How will private buyers who could hardly mobilise less than N400 billion in a year to pay for the bought companies, provide this amount ? Can Nigerian banks and financial houses provide this amount without collapsing ? Which foreign investors will be ready to commit such a huge amount to Nigeria’s fragile economy ? Where will the 70 percent poor Nigerians get the income to pay the bill of such investments ?

Meanwhile, within the last 12 years, over $20 billion (N3 trillion) has been wasted on power generation and supply by successive governments. This estimated N1 trillion yearly investment is less than the N1.3 trillion cornered yearly by just 17, 474 political office holders as salaries and official perks. Just less than 20 percent of the over $500 billion earned from oil and gas will provide stable electricity to all Nigerians. Yet Nigerians are told government does not have the resources to provide electricity. Even if these resources are committed to the sector, Nigerian ruling elites will surely loot them, the same way they have directly looted over $400 billion. Surely, the Nigerian capitalist class, on the basis of their backward, primitive accumulative character and neo-liberal outlook cannot move the country forward, economically, socially, technologically and politically ; neither can global imperialism take Nigeria out of backwardness. The power privatization has shown this clearly.

In order to solve the problems facing power sector, there is a fundamental need to take the sector out of the hands of both private profiteers and corrupt, pro-big business public officers. The power sector, including the PHCN, must be put under democratic public ownership. This will mean that while the sector is made public property, it will be managed, supervised and controlled democratically by elected representatives of in-house workers’ unions, communities, consumers, and central labour unions. It is with this approach that money allocated and revenues made will be democratically used for the collective improvement of the sector from local to national level. It is on this basis that there can be well laid out plans to expand infrastructures and maintain existing ones. It is on this basis that electricity sector can be made to be an instrument of development of the country. However, this in itself will mean putting the mainstay of the economy under the democratic control and management of the working people and communities. By taking the economy away from the hands of the few big businesses and their multinational backers, Nigerians can plan how to deploy the enormous but inexhaustible wealth of the country to provide for all, and the future yet unborn.

However, this cannot be achieved without firstly dethroning the current neo-colonial capitalist class in Nigeria, and establishing a genuine working people’s government based on socialist programmes and agenda. This underscores the need to build a pan-Nigerian working people’s political party with a clear internationalist and socialist outlook. Such a party based on working people, youth, students, and the poor, and opposed to anti-poor policies of privatization, commercialization, etc. can mobilise people to the political arena to change the course of history.

* Kola Ibrahim is Secretary, Socialist Party of Nigeria , Osun State