Recovery of Cost of Electricity Supply in the Nigerian Power Sector

The poor performance of Power Holding Company of Nigeria (PHCN) was attributed to   low tariffs and inadequate revenue generation. The Federal Government of Nigeria is in the process of handing it over to private organizations to be involved in generation, transmission and distribution of electricity in the country under public-private partnership (PPP) arrangement. Private investors are in business to make profit and cannot afford to lose their investment. This study analyzed revenue generation in the power sector to determine the extent to which it covers the operational cost of electricity supply in the Nigerian power sector. The study also examined whether increase in tariff has significantly increased revenue, and the impact of the increase in power generated during the study period. We discovered that even though operational cost is not fully recovered in some years but the level of recovery is significant.  Also revenue has significantly changed after the application of MYTO in 2008. However, the revenue generation did not have any significant impact on power generation. The major recommendations of the paper are that tariffs set should be such that would enable the private operators who may take over the sector to recover their cost and make gains. Effort should be made to block all illegal connections and avoid high transmission and distribution losses. Good quality service which includes regular supply of electricity should be ensured to motivate consumers and increase demand for electricity. Keywords: Cost Recovery, Power Sector, Tariffs, Public-private partnership, Power generation

Product Cost Management in Developing Countries: Activity - Based Costing

This Article examines the challenges of Product cost management in relation to Activity – Based Costing (ABC) by manufacturing companies in a developing country like Nigeria. This study is distinct and peculiar to Nigerian environment and examines the challenges of product cost management as it affects ABC/ Traditional costing system and considers whether it merits adoption in a developing country like Nigeria despite its little statistical difference. In order to effectively determine the effect of these challenges, questionnaire was issued to 58 sampled companies in the South East of Nigeria and Test of Hypotheses was done based on production cost data collected from the companies using Student’s t-test and Multivariate Analysis of variance (MANOVA). Findings:  there is no statistically significant difference in cost reduction attained by ABC over Traditional costing, though ABC tended to have higher effect. Profits realized in Industrial and brewery sectors of the Manufacturing companies surveyed were higher in ABC than in Traditional costing. Recommendations: ABC should be applied by manufacturing companies in Nigeria since any little difference in cost – savings can influence managers’ decisions. ABC should be adopted because it provides more accurate cost information to management which ordinarily is not visible in Traditional costing system. The challenges of the initial high cost of implementation of ABC should not deter these companies from adoption of ABC since its long run benefits surpasses its costs.  Since product costs are lower in ABC, its adoption will help manufacturing companies’ products in developing countries to compete favourably in the international market especially in this era of International financial reporting standards. Keywords: Activity-Based Costing, Traditional Costing, Effectiveness, Competition,Cost Reduction, Product, Cost, Management, Overhead, Decision – Making