Estimating Household Willingness to Pay for Improved Electricity Supply in Lagos Metropolis

Abstract

Nigeria’s per capita electricity consumption is one of the lowest in Africa; with the residential sector being the worst hit. The supply from the state owned Power Holding Company of Nigeria (PHCN) is often erratic forcing most households to resort to the use of generators with its attendance noise and air pollution besides other adverse consequences. The study employed non-market valuation techniques (conjoint analysis, contingent method, and multivariate analysis) to assess the Willingness-to-pay for improved electricity supply using two housing estates within Lagos metropolis as case study. The study reveals the attributes of electricity supply services that give the highest utility, and also the Willingness-to-pay bids of the residents of the two estates. These results were combined and tested for sustainability based on the current cost of generating and maintaining electricity by wind turbines which is considered as one of the most cost-effective options available. Simple ‘payback’ analysis shows that the very low Willingness-to-pay bids of the residents of the two estates would barely support completely deregulated private sector participation. By implication, electricity supply to the estates under reference (including similar and estates of inferior socio-economic characteristics in the metropolis) would continue to be provided by the state-owned Power Holding Company of Nigeria (PHCN) at the existing subsidized rates.