Nigerian Energy Reforms – RantAWeek

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Nigerian Energy Reforms

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Posted by Angela Yang on September 17, 2012 at 6:36 pm

Nigeria is Africa’s largest oil producer, yet fraud and corruption tarnish its fuel and energy systems, creating necessity for change. When running for president a year ago, Goodluck Jonathan promised to mainly focus on electricity reforms. Even though the promised reforms are clearly essential and must be strictly enforced, many have gotten rich by circumventing the reforms to make money privately or by stealing the funds put aside for building power plants. Millions of Nigerians continue to endure the decade-old problem of a shaky infrastructure and concerns of security.

In an effort to ensure that the government gets profit from electricity production, Goodluck Jonathan imposed a new tariff system. The system was set in June, and it increased electricity prices for the next two years. Although the increase will be gradual and the poorest families are to receive new electricity subsidies for at least the two year time span, there was a chance that the tariffs would trigger enormous protests. Citizens will pay high prices for a limited number of light hours due to new electricity tariffs. With an unreliable electricity supply and continually growing prices, protests become more and more likely, but the last thing Nigeria needs is protest against the recently disrupted political system.

Bartholomew Nnaji, the former high-profile, technocratic finance minister, resigned from office due to conflicting interests with the government. As a result, the previously improving electricity supply in homes and offices has returned to old order over the past few weeks. Many large cities receive eight hours or less of power supply, and parts of Nigeria’s largest city, Lagos, has been cut off completely of electricity. The issue continues due partly to the fact that risky new systems provide political uncertainty. Investors who were once comfortable with government financing became troubled after this because they felt like he was the only politician with expertise in public sector bidding. A lack of investment will be detrimental to the government’s power sector, as it now requires around ten billion dollars a year of investment for at least a decade.

Nigeria’s government needs the revenue to build on electricity production, but it appears to prefer oil exportation over development at home. However, state’s revenues from power supply cannot be boosted by reforms if corruption profits the wrong people. Reports show that, over the past two years, almost seven billion dollars have been lost in the oil sector with fraud. Recent robberies of tanker ships could very likely be the work of a specific group of criminals, who has been more willing to use violence when in trading stolen oil. On the Niger Delta, hundreds of thousands of barrels of oil a day are stolen from pipelines running through the swamps and illegally sold for profit.

The new finance minister, Okonjo-Iweala, hopes to stop this mismanagement and use funding where it is needed. She faces the challenge of cleaning up embedded corruption, but has trouble taking action because of her lack of support. Ms. Okonjo-Iweala needs patronage from wealthy figures like military officers or previous party leaders who wield a lot of political power. The many institutional changes that the ambitious leader wants to make have to be supported by multiple ministries, which take matters out of her control. Difficulty in exterminating fraud in Nigeria’s fuel and energy sectors will make Mr. Jonathan’s electricity reforms seem harsher than they should be, and could create many more problems to come. Good luck, Jonathan.

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  • On September 26, 2012 at 7:42 pm Julia said

    Well played.

    • On September 27, 2012 at 4:02 pm Angela said

      Thank you.

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