SOARING ELECTRICITY TARIFF!
Socialist Democracy November/December 2011
SOARING ELECTRICITY TARIFF!
For community-based mass resistance now!
NLC and TUC Should Call General Strike/protests now
No to PHCN Sale; For Public Ownership and Democratic Control
By Kola Ibrahim
Despite all attempts to portray the sale of the Power Holding Company of Nigeria (PHCN) in good light, actual reality continues to show that it is nothing but a means to rob the public in the interest of the few rich.
Already, the brutal impact of the privatization is being borne by the consumers even before the formal takeover by these capitalist vampires, most of whom presided over the poor performance of the public electricity company in the first instance. In order to pave easy way for a quick but super profit for these elements who have bought the unbundled distribution companies at give-away prices, electricity tariff has been outrageously increased. The struggle against this rip-off has broken out in many communities, especially in Lagos. Similar struggles may break out elsewhere. It is crucial for Socialists, trade unions and pro-masses organizations to intervene to build this kind of struggle in the communities into a strong and united movement of mass non-payment of crazy electricity bills. However unless the whole racket called privatization is defeated by mass struggle of electricity workers and communities, consumers should expect to pay much more by the time the sale of the PHCN is completed.
Indeed, PHCN privatisation is a dead-end as recent revelations of sleaze already shows. Even if before now illusion in privatisation of power could be understood from the stand point of people’s frustration with erratic or non-supply of electricity, the current revelation that corrupt former military and civilian leaders like Babangida, Abukakar and Obasanjo have vested interests in some companies participating in the bid already compromises the whole process and makes any further illusion in privatisation by labour leaders completely impermissible.
Therefore, as an immediate task, we call on workers and labour activists to agitate for declaration of a 48-hour warning strike and mass protest by labour unions as part of a sustained mass campaign to defeat privatization and crazy tariff. This should also include mass production of educative materials to enlighten and mobilize the support of mass of the working people for a mass action to defeat this anti-poor policy. The labour leadership must also link up with community activists and consumers associations in order to build a formidable national resistance.
We believe that one of the major weaknesses of previous attempt by National Union of Electricity Employees (NUEE) to fight the sale of PHCN was the inability of the union to aggressively propose an alternative that can make power generation and supply work which is through public ownership of the PHCN under workers and consumers democratic control and management. The ruling class exploited this loophole in NUEE’s opposition to present the union to the public as only being selfish about the interests of just its members as opposed to the interests of other Nigerians. By proposing a real and workable pro-masses alternative to privatisation, the labour movement will not only be able to begin to neutralize government propaganda, but also begin to win the support of the public by exposing the lies being told that privatisation is the only way out.
THE FRAUD CALLED POWER PRIVATIZATION
The Nigerian capitalist governments, led by the Goodluck Jonathan/PDP regime, have not hidden their bias for this fraudulent process. This explains why the privatization has been dogged by monumental fraud and rip-off of Nigeria as an entity by the capitalist government and its big business partners. This is clearly reflected in the manner the generating corporations have been sold off. The six electricity generating firms were sold off at the rock-bottom price of around N107 billion (around $710 million), meanwhile between 2007 and 2012, over N600 billion was spent on power generation and distribution by both the Jonathan and the Yar’Adua governments. In fact, the two main hydropower plants, Kainji and Shiroro, upon which billions of dollars have been spent to refurbish and expand, were sold for meagre $760 million and $354 million respectively on a 15 year-lease. These are plants with properties and facilities worth billions of dollars including the expansive cum expensive dams. Indeed, in the 2012 budget, more than a billion naira was budgeted for the refurbishment of one of Shiroro hydropower plants. In addition, the 60 percent of government shares in 10 of the 11 distribution companies are to be sold at total price of N196 billion.
Reflecting the bankruptcy of government’s own process, NERC, the regulatory agency in the power sector had earlier undervalued the 11 distribution companies at N328.75 billion; yet 10 of the 11 companies were being sold for N196 billion! Interestingly, according to Joe Ajaero, the General Secretary of NUEE, land property of the distribution companies alone is worth more than a trillion naira. This means that all the transformers and distribution facilities worth several billions of dollars are being grossly undervalued and auctioned out.
Even, the newly completed state funded IPPs, upon which billions of dollars have been looted, are being auctioned. According to James Olotu, the Managing Director of Niger Delta Power Holding Company (NDPHC), a subsidiary of PHCN, over $8 billion (over N1.24 trillion) was used to build 10 new power stations. However, three of the new power plants (Geregu, Ughelli, Sapele), contributing about a quarter of the expected power generation, and costing about $2 billion (N300 billion) were sold for less than N100 billion.
While government set up a liability management company, NELMCO, to shield the private buyers from the N392 billion debt incurred by PHCN, there is no explanation of who will collect the over N600 billion owed to it by government agencies and private businesses. The debt incurred by PHCN included N149.5 billion owed to Power Purchase Agreements with private power (IPP) producers. The reality however is that, while PHCN purchases power from these private power producers at market rates (i.e. far higher than its own tariff); private companies, including big corporations, pay subsidized tariffs (guaranteed with public fund) for electricity generated from PHCN plants. This is clearly double standard meant to serve the interests of big businesses. Yet, many a private big business (possibly including the current buyers of PHCN parts) owes the corporation billions of naira in debt.
Indeed, between 1999 and 2007, the Obasanjo government was reported, by the House of Representative Committee on Power, to have spent over $16 billion (more than N2.4 trillion) on power sector, with over 30 percent of this spent on existing PHCN power plants, without any tangible result. This amount, $16 billion is more than a quarter of the $60.9 billion estimated by IEA in its 2008 World Energy Outlook, needed to provide universal access to all Nigerian households. Yet, more than 60 percent of Nigerians have no access to electricity (with less than 10 percent of the rural dwellers having access), while those who have hardly enjoy its benefits due to erratic supply, itself occasioned by dilapidated infrastructures and out-dated equipment.
Worse still, those who have contributed severally and collectively to this ridiculous state are the ones now bidding to take over the facilities of PHCN. For instance, firms with links to ex-generals like Generals Abdulsalami Abubakar, Ibrahim Babangida, Olusegun Obasanjo, etc; and big businessmen and women associated with looting of public fund under the guise of privatization (like Transcorps, Otedola’s Forte Oil, Arumemi’s Rockson, and several other consortia of big businesses) have won bids to take over the nation’s electricity infrastructures.
The government is spending public funds to prepare public corporations for private takeover, so that the private big businesses can make quick profits. Moreover, the Nigerian government in order to guarantee continuous profit making for the private businesses hiked electricity tariff by up to 100 percent. One of the grand plans to make PHCN a cash cow for private investors is the organized attacks on the workers of the corporation by the government. These attacks, heightened by the disgraced former minister, Barth Nnaji (himself a private bidder for one of the PHCN firms), are meant to not only retrench the workforce and consequently reduce the labour cost but to deny workers of their entitlements as a way of making the privatized firms profitable.
PRIVATE INVESTMENT WILL NEVER RESOLVE POWER PROBLEM
The argument of the government for these shenanigans is that the firms must be made profitable for private investors to invest their capital in the expansion and maximum functioning of the firms. The reality and facts on ground however have torn this argument to shred. In the first instance, the so-called investors are no more than predators with any interests in any investment. As said earlier, most of the private bidders are the same set of people associated with various crises in different sectors of the economy. More than this, most of the bidding companies are mere venture capitalists, with little or no previous investment in power generation. The few with serious investment in power generation only generate a few megawatts mainly for their business uses; therefore, it is clearly absurd to hand over huge and important organ of the economy to this set of people.
This is further underscored by the fact that most of the so-called investors have no capital even to pay up the rock bottom prices of these auctioned firms. Showing the bankruptcy of the government, all the bidders needed to show their readiness to buy the firms is Letter of Credit from banks. This simply means that, there is no fundamental criterion for buying off the nation’s patrimony, possibly except your connection to the corridors of power. With this, the nation’s power sector will be controlled by financial capitalists and banks, whose sole task is the predatory extraction of profits. Indeed, the process is so ridiculous that several shameless bank debtors, who owe government and thus the public, through AMCON, of over N2 trillion even rushed to banks to get letters of credit. It was so embarrassing that the Central Bank had to issue directive to stop further loans to the 419 (number of people on the debtors’ list) debtors. Possibly, this little effort might have saved banks from another immediate crisis. However, in the long-term basis, this will lead to monumental crises. For instance, one of the debtors, Femi Otedola, who owes AMCON over N149 billion in debts was able to wriggle himself out through a clearly fraudulent process, and was able to buy one of the power generating firms!
Even in cases where foreign investors directly own the privatized firms, this does not translate to improved or expanded power supply to Nigerians. On the contrary, with the virtual collapse of basic infrastructures and the precarious state of global capitalist economy, this will mean that they would be assured of their investment returns through hike of electricity tariff before thinking of any investment. Even, the cost of maintenance of the existing power plants is enough to throw any plan of investment in expansion to the last rung of the priority ladder. For instance, the cost of importing parts and equipment for maintenance will be denominated in dollar, which will lead to hike in cost of production, and subsequently higher prices for generated electricity. Also, the cost of procuring gas for gas-fired plants is enough to weigh down on such foreign investors to think of any serious investment in expansion.
What this will imply is that: (1) there will be hike in cost of production and hike in tariff, (2) in case the companies face financial problems in this process and the power sector is to collapse, government will come in by using public fund to bail out private businesses, just as over N3 trillion, that could not be invested in infrastructures, was used to bail out a handful of banks.
WHAT POWER PRIVATIZATION MEANS FOR THE WORKING POOR
This privatization means turning power to a commodity and 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. Then, they will scale back operations to profitable ventures. This will mean your villages, streets, communities, businesses; etc. may be cut off from the grid if supplying you 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 in order to guarantee profit. This will reflect in cost of running businesses and cost of living. The argument is simple: if you cannot afford the cost, try generator. Meanwhile, under the current arrangement, although supply is poor, you can still relatively afford it. Under privatized arrangement, you either pay or die. With this, many communities and businesses will be cut off.
The social and economic consequence of privatization can only be imagined. For instance, many private businesses will collapse based on hiked cost of power leading to further job losses. This is aside the high cost of living that hiked tariff will mean for teeming millions of working class and poor families, and small business owners. This will lead to rise in poverty rate, which will further drive down any effort at developing the economy. Added to this is frustration and social tension it will generate.
FOR DEMOCRATIC PUBLIC OWNERSHIP, CONTROL AND MANAGEMENT
In place of privatization, working people and their organizations should demand for public ownership of the power sector under democratic control of workers and communities, as against the current arrangement where running of the power sector is put in the hands of political patrons and big business people who use the sector to advance their profit interests and those of their business partners. This will mean putting running of PHCN facilities and resources, including funds under democratic control, scrutiny and planning of workers and consumers in communities.
Working people must also demand the immediate arrest and prosecution of looters of power sector funds, and public takeover of private companies (including banks) involved in the monumental frauds and looting. Such companies should be put under the direct democratic control and management of the workers in such companies, and elected representatives of host communities, consumers, etc. and a plan for a rapid electrification of Nigeria drawn up and implemented.
While we recognize the obvious failure of PHCN to provide electricity for Nigerians, we hold that this is a product of the deliberate rundown of the corporation by big time politicians and big businesses. While PHCN (NEPA before it), was funded from public resources, its management and running were bureaucratized, as those who were undemocratically appointed to run it, only use it to serve the their interests and those of their patrons in politics and big businesses, who milked the corporation dry as reflected in wasted billions of dollars. This undemocratic and corrupt management of PHCN is behind its almost collapse, and indeed many public owned entities. We hold that with democratic control by workers and consumers from grassroots to the national level, PHCN, and of course, other public entities can be made to serve the country effectively.
With public ownership, the economic development can be properly planned with power being made an integral part of this. For instance, based on democratic planning, we can determine how much electric power we need to sustain development of other sectors of the economy â€“ steel, manufacturing, social services, etc. From this, the resources needed for an integrated development of the power sector can then be democratically drawn out. In addition, with public ownership, it can be possible to determine how many graduates, technicians and technologists are needed, and this can be integrated in the education policy. This is the surest means of making electricity serve the people, and not otherwise.
LABOUR LEADERSHIP RESPONSES
Unfortunately, the labour leaders believe that there is nothing fundamentally wrong in privatization, inasmuch as the process is transparent. Of course, the in-house unions opposed privatization initially, and even committed themselves to organizing against it. However, because of lack of clear-cut alternative to privatization and lack of consistent strategy consistent approach to resist the policy, they settled for collecting entitlements of their disengaged members! However, the biggest obstacle to defeating privatization of the power sector itself came from the leadership of the central labour unions â€“ NLC and TUC. Despite the enormous potential to mobilize the working people to defeat this fraud, the leadership undertook a piecemeal policy of defending only the severance disengagement of electricity workers.
From the start, the central labour leaders did not oppose privatization of PHCN. Indeed, in labour leaders’ several positions on the matter, they actually supported it thus helping to build false hope in privatization. For instance, at the Senate hearing to review privatization the vice president of NLC, Issa Aremu, was quoted to have supported privatization, even when over 80 percent of privatized firms were officially declared as failure. Moreover, the NLC president himself was quoted in a recent forum that the labour movement traded its opposition to privatization of PHCN, for the payment of the entitlement of electricity workers! This reflects the fact that the labour leadership is not opposed in principle to privatization and its accompanying fraud. This is not unexpected as the labour movement itself is a ‘stakeholder’ (according to the NLC) in the privatization process, having membership in the National Council on Privatization (NCP), the highest government council superintending over auctioning of public entities! All this exposes the pro-capitalist orientation of the labour leaders and the need for a revolutionary leadership of working class that can lead a successful campaign and opposition against privatization with clear socialist alternatives.