…a country is best served when services and goods providers operate in competitive markets. Rather than mount the bully pulpit, Chief Adelabu would serve the domestic power sector best by reducing monopoly behaviour therein. A competitive market would require free exit and entry of both consumers and suppliers of electricity. And where natural monopolies exist, a regulatory environment with a clear remit for sustaining consumers’ welfare is a non-negotiable requirement.
One unintended consequence of the Minister of Power’s recent intervention in the domestic policy conversation was to move the phrase “turn off the deep freezer” into the same high-octane league (of social media tropes) as “off your mic.” The problem with the power minister’s suggestion (that in response to the rising cost of power, previously profligate consumers could do no worse than turn off their electrical devices when these are not in use) was to move the idea of demand management into paternal territory. This problem is at once ethical, as it is functional. Our politicians cannot solicit for votes from voters and take the moral high ground against them at the same time and in the same space. On the other hand, when sections of the electorate vote for a change agenda, it is nearly always in the expectation that some other sections will bear the cost of the expected transition. On this reading, it was, then, easy to ask, which of the many countries Chief Adebayo Adelabu has visited do the folks there turn off their freezers? Certainly not the United Kingdom. There, folks apparently turn off their heaters to keep costs down, instead.
Admittedly, a key goal of reforms to an underperforming economy such as ours is to discipline consumption. Especially when this involves full cost recovery in the pricing of publicly provided goods and services, the goal is to allocate resources more efficiently by ensuring that consumption is not wasteful. In the temperate United Kingdom, this logic has heating costs far more expensive than refrigeration costs. And the market responds accordingly. On this reading, Bayo has a persuasive argument. He just did not make it properly. On a related note, the search for energy efficiency in our homes is a necessary condition, both for adapting to and mitigating the effects of an increasingly hotter world. The Economist newspaper estimates that both heating and cooling costs for houses comprise 18 per cent of global energy-related greenhouse gas emissions. Nonetheless, when a good or service is priced below cost, or the market clearing rate, the tendency is for markets to allocate these inefficiently. Indeed, if the management of our domestic water resources teach any lessons, the tendency is to waste such resources. That was what we did with our foreign reserves over the nine years until early 2023, when the official exchange rate of the naira lagged the parallel market rate.
Unfortunately, even when higher costs of procuring goods and services force their more efficient consumption, a country is best served when services and goods providers operate in competitive markets. Rather than mount the bully pulpit, Chief Adelabu would serve the domestic power sector best by reducing monopoly behaviour therein. A competitive market would require free exit and entry of both consumers and suppliers of electricity. And where natural monopolies exist, a regulatory environment with a clear remit for sustaining consumers’ welfare is a non-negotiable requirement. These will guarantee that the price at which consumers (both industrial and residential) source their electricity needs is as close as possible to the providers’ marginal costs of supplying each unit of electricity – without hurting the incentive to seek innovative solutions.
…integration is as much about better rule making, and risk-based supervisory frameworks. While, at a more abecedarian level it is simply a matter of improving infrastructure. Roads and rail to get goods to the market faster. Broadband networks to speed services. A better criminal justice system that guarantees a fair enforcement of contracts, and thus strengthening trust within the economy. The list is long. And Chief Adelabu only needs to briefly look away from his deep freezer’s power switch to get it.
The goal of improving the efficiency of markets goes beyond the needs of our decrepit power sector. Accordingly, a further challenge before a reform-minded government would be to integrate the domestic market for goods and services. At first blush, this requirement sounds counter-intuitive. But within states, barriers to entry into markets (especially in the informal sector) are as potent and as inhibitive of commerce and trade, as are those between states. Informal guilds and trade bodies sap as much animal spirit off the economy as the bureaucratic hurdles to setting up businesses do.
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At one level, integration is as much about better rule making, and risk-based supervisory frameworks. While, at a more abecedarian level it is simply a matter of improving infrastructure. Roads and rail to get goods to the market faster. Broadband networks to speed services. A better criminal justice system that guarantees a fair enforcement of contracts, and thus strengthening trust within the economy. The list is long. And Chief Adelabu only needs to briefly look away from his deep freezer’s power switch to get it.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
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