Electricity Tariff To Rise By 300%

Electricity Tariff To Rise By 300%

Power companies will be allowed to raise electricity prices to N200 ($0.15) per kilowatt-hour from N68 for urban consumers this month, the Bloomberg news agency, citing sources, reported Tuesday.

It was learnt that these customers represent 15% of the population that the government says consume 40% of the nation's electricity, the agency said.

Bloomberg said Nigeria plans to almost triple energy prices within weeks.

It quoted people in the presidency with knowledge of the matter saying this was in a bid to attract new investment and slash about $2.3 billion spent to cap tariffs (subsidies).

According to the news agency, "Nigerians will now have to pay $2.42 per one million British thermal units from the previous rate of $2.18 MMBtu."

Daily Trust reports that this revelation is coming in the wake of Monday's announcement by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) of an increase in the price of natural gas, which is used to generate more than 70% of electricity in Nigeria.

NMDPRA had set a new 2024 base gas price for companies in the power sector and commercial users.

This was contained in a statement signed by Farouk Ahmed, the authority's chief executive.

Nigeria had privatised generation and distribution in 2013, and tariffs are set by the Nigeria Electricity Regulatory Commission (NERC), a government-controlled body.

Bloomberg said, "Power firms aren't allowed to charge enough to recover the cost of distributing electricity, with the government paying the difference as a subsidy to companies in the sector.

"The government has in the past said that electricity companies are short of an estimated two trillion naira in capital and need new investors to revive the industry."

But activists who spoke to our correspondents yesterday expressed shock, saying it would be impossible for Nigerians to bear outright removal of subsidy on electricity, in addition to the removal of fuel subsidy, which had in turn made life unbearable.

When contacted by Daily Trust yesterday, the General Manager, Public Affairs of NERC, Dr Usman Arabi, did not respond to calls and text messages sent to his phone.

But Bloomberg quoted Bayo Onanuga, a spokesman for the presidency as saying, "The regulator (NERC) will make a pronouncement based on its discussion with the distribution and generating companies.

"The presidency cannot say anything at this stage. Electricity sector is hurting."

Nigerians overstretched - CSOs

However, members of the Civil Society (CSOs) have expressed deep concern over the recent reports indicating that the federal government is once again planning to almost triple the electricity tariff within weeks.

Speaking on the development, the Executive Director, Resource Centre for Human Rights and Civic Education (CHRICED), Comrade Ibrahim M. Zikirullahi, said that the proposed tariff of N200 per kilowatt, compared to the current N68 per kilowatt, highlights the lack of empathy within President Bola Tinubu's administration.

"This move disregards the struggles of millions of Nigerians who have been pushed further into poverty as a result of the abrupt and poorly planned removal of fuel subsidies."

CHRICED warns that the "bull in the China shop" approach to public policy implementation, will only worsens the economic hardships faced by Nigerians during the administration of President Muhammadu Buhari.

He said: "Despite mounting tensions, the government seems oblivious to the growing impatience among Nigerians, paving the way for potential mass protests and social unrest in the country".

Also, the Executive Director, Cleen Foundation,  Gad Peter, said that the development was surprising, especially because when Tinubu government came on board in May 2023, the discussion of increasing electricity tariff came and it was shelved because of the difficulties Nigerians were going through.

"I remember the National Assembly saying that the timing was very wrong. So I am surprised that we are coming back to this conversation again and it is almost a 300 per cent increase.

"I think the federal government and the electricity distribution companies and all of their allies need to be more sensitive to the pain that Nigerians are going through.

"I am very much aware that you know that in the last one month or so, electricity supply has been very inconsistent, people are just struggling to survive.

"And even people that have alternative sources of power like generators are struggling to either buy diesel or fuel to be able to run it through the night or through the day to keep businesses and to stay alive by reducing the heat.

"I think that this is not the best decision considering the fact that we are still struggling with the negative effect of the removal of the fuel subsidy.

"We are still struggling with insecurity, with the level of poverty in the country, still struggling that people are paying high for fuel," he said.

Efforts to reach the President of Nigeria Labour Congress (NLC), Joe Ajaero, to get the official position of the organised labour last night proved abortive.

Ajaero, who did not pick several calls, did not also reply to a text message sent to him as at when filing this report.

In the same vein, calls to the Head of Information at NLC Headquarters, Benson Upah, rang unanswered, and he was yet to reply to a WhatsApp message sent to him.

How fuel subsidy removal, fx complicated electricity tariff

Experts have repeatedly said that the removal of subsidies on petrol and the floating of the naira by the current administration are two twin decisions that have complicated NERC's 2022 Multi-Year Tariff Order (MYTO).

Although the power sector players have been unable to meet the threshold of supplying at least 5,000 megawatts a year after signing contracts with NERC, the commission's current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent.

Going by the NERC's orders, in 2015, the average tariff across distribution companies (DisCos) and classes of end-users was N25 kilowatt, in order of 198/2020, which came into effect on September 1, 2020. The average tariff went to N60 per kilowatt; in the MYTO for 2022, the average tariff was N64 across classes of customers.

The foreign exchange rate used in determining the 2015 tariff was N198.97/$, N383.80/$ was used in 2020, while N441.78/$ was used in 2022. The inflation used in the 2015 MYTO was 8.3 per cent, 12 per cent was used in 2020 and 16.97 per cent in 2022.

Currently, the inflation rate is 31.70 per cent and some experts have projected that it would hit 35 per cent by the end of June

How FG plans to halt power sector subsidy from 2025

Nigeria operates a fixed tariff system where the federal government sets the price of electricity through NERC.

For 2024, the federal government projected to spend around N1.67 trillion on electricity subsidy, an increase of 170% from the figure spent in 2023.

According to the NERC's guidelines, electricity distribution companies were to halt the subsidy regime in the power sector from the beginning of 2025. The IMF had earlier warned that subsidy on fuel and electricity tariffs could cost Nigeria up to 3% of GDP in 2024. 

The Minister of Power, Bayo Adelabu had earlier hinted at plans to sell gas to power plants across the country in naira occasioned by the dearth of foreign exchange in the country.


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