Economic cost of electricity outages: evidence from a sample study of industrial and commercial firms in the Lagos area of Nigeria.

Abstract

The purpose of this study is to estimate some of the measurable costs of electricity outages from a sample of industrial and commercial firms in the Lagos area. To achieve this objective, over 100 firms were surveyed. Analysis of the survey returns showed that firms in the area sustained substantial economic costs, consisting of adaptive costs (investments and operating costs on own generation), operating losses (raw and processed materials), equipment losses and unproduced output. Most of the firms indicated that NEPA's tariff was expensive. They also recommended among other things, private sector participation in the electricity industry and privatization of the National Electric Power Authority (NEPA) in order to improve electricity supply and distribution in Nigeria. Policy issues arising from the study include urgent need for government policy on private sector participation in the electricity industry; privatisation of NEPA; granting of tax incentives to firms for investment on own generation, so as to dampen cost-push inflation; the granting of legal rights to manufacturers to claim for certain losses resulting from electricity failure, while electricity firms should be allowed to enforce laws infringing on electricity supply, transmission and distribution, and the need to standardise generating sizes ,and regulate generating models to ensure maintainability and easier access to spare parts.