Does MYTO Tariff Review Impact on the Flow of Private Investment to the Nigerian Electricity Supply Industry

Abstract

The Nigerian economy has been experiencing severe electricity supply crunch which has negatively impacted on the operation of the economy and the people's wellbeing. For decades the industry, dominated by the government SOE (NEPA and now renamed PHCN) provides epileptic service to the economy that has failed to meet the electricity needs of Nigerians. Government introduced industry reform captured in the 2005 EPSR ACT. The reform seeks to open the market for private investment in the generation segment and promote competition with the ultimate aim of increasing generation and supply of electricity to the national economy. To attract the private sector to the Nigerian Electricity Supply Industry (NESI) the government introduced gradual tariff review called Multi Year Tariff Order (MYTO) .The paper assesses the impact of MYTO on the flow of private investment to NESI. Questionnaires were used to generate data from sampled respondents. Simple regression analysis was used for data analysis and hypothesis testing. The result of the analysis indicates that tariff review has a positive and significant impact on the flow of private investment to NESI though it explains only about 3% of the variation in the dependent variable (FPI). This shows that investors' response to the government tariff review has been very slow. Government therefore needs to take another look at the current tariff adjustment order (MYTO) as a way of fast-tracking the flow of private investment to the industry for enhanced electricity supply to the Nigerian economy.