Nigerians and indeed businesses may experience financial implosion if reports of electricity tariff increase reflects the percentage being circulated and reported in the media.
Stakeholders and other concerned Nigerians have warned of possible socio-economic consequences of such a decision.
Though from an investment point of view some players said the removal of subsidy could encourage more investment and provide more jobs.
This is as Abuja Electricity Distribution Company (AEDC) retracted its earlier decision to implement the increase on electricity tariff by July 1, 2023.
In a Twitter post on Monday the company advised the public to disregard the circulating communication, regarding the review of electricity tariffs.
“Be informed that no approval for such increments has been received. We regret any inconvenience,” it said.
Recall that the company had hinted on an upward review of the electricity tariff which according to the management will be influenced by the fluctuating exchange rate.
Labour Fears Job Losses As DisCos Raise Electricity Tariffs
“Effective July 1, 2023, please be informed that there will be an upward review to the electricity tariff influenced by the fluctuating exchange rate,” it had said in a public service announcement seen by LEADERSHIP on Sunday.
“Under the MYTO 2022 guidelines, the previously set exchange rate of N441/$1 may now be revised to approximately N750/$1 which will have an impact on the tariffs associated with your electricity consumption.”
It had stated that for customers within band B and C, with supply hours ranging from 12 to 16 per day, the new base tariff is expected to be N100 per kWh while Bands A with (20 hours and above) and B (16 to 20 hours) will experience comparatively higher tariffs.
Speaking on the planned tariff hike, chief executive officer, CEO of the Center For The Promotion Of Private Enterprise, CPPE, Dr. Muda Yusuf, said that apart from its wrong timing, the 40 per cent proposal is exploitative and will further weaken the purchasing power of the citizens and negatively impact on small business operators.
He called for its suspension as operators in the sector are using the monopoly structure in the industry to unbalance the already precarious socio-economic situation of the country.
Also, speaking on the proposal, president of the Nigeria Consumer Protection Network (NCPN), Kunle Kola Olubiyo, raised serious concerns saying the exercise would throw consumers into further hardship as people have not recovered from the impact of petrol subsidy withdrawal.
He said the proposal would see payments rise between N150 to N300 per kilowatt hour.
The NCPN president, in his analysis of the proposed hike said that at the moment, customers in Band C that presently pay N40 per kilowatts hour may be increased to about N100 per kilowatts hour, while Band A that is presently at about N56 per kilowatts hour may be jerked up to about N150 per kilowatts hour.
“What it means technically speaking is that electricity tariff rates are now going to be floated and it will be market driven as Naira/Dollars Exchange rates will now be subjected to a market free fall.
With high exchange rate volatility in the next few days, electricity tariff may go between minimum baseline of N100 with maximum threshold of N300 per kilowatts hour” added Olubiyo.
He unfortunately noted that as sad as it is this shall not translates into any significant improvement in Reliable Electricity Supply nor translates into upscale in efficient service delivery due to obsolescence of critical power grid infrastructure ,
Technical and Commercial Losses and poor culture of market remittances , grid constraints amongst others.
On his part, Engr. Kola Balogun, CEO, Momas Electricity Meters Manufacturing Company Limited, said that if raising tariffs will drive investment recovery and generate jobs it should be encouraged but it is important that the power sector downstream is properly balanced.
Balogun, told our Correspondent that the downstream grid supply system is a mix breed where we have both metered and unmetered customers and with estimated billing under the impending tariff structure would create a whole lot of disparity with those without meters would pay exorbitantly.
According to him, liberalizing customer metering would bring immense benefits to the NESI and also to electricity customers who suffer the twin effects of poor services and high estimated billing.
Balogun, said the first benefit of the liberalisation is that Distribution Companies, DisCos can increase their allowable capex requirement and deploy more investments to network improvements and reducing technical losses, and the metering gap would be closed faster as customers would be compelled to procure their meters if they are to continue to enjoy electricity services.
More importantly, he said that there would be greater customer satisfaction and willingness to pay for electricity services by customers.
He added that liberalising customer metering by decoupling the cost of electricity meters from energy tariffs and allowing customers directly procure their meters as part of their connection cost to the electricity grid is the surest way to finally address the metering gap both now and in the future.
Also, commenting on the situation, executive director of the Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa Rafsanjani, said the right thing expected of government to do before this increase of electricity tariff is to ensure that strengthening of the national grid so as to adequately supplied electricity in the country.
Speaking with our correspondent in Lagos, he said, “We have not built a very strong and vibrant national grid that can guarantee the distribution of the electricity across the country. So that is one thing that we ought to do.
“Secondly, we have spent a lot of money in improving the electricity supply because money was largely diverted and stolen over years towards addressing challenges of the sector.”
Musa, said government should redirect its policy towards completing abandoned projects, noting, “We cannot be initiating projects and after spending huge amount of money and then we abandon those projects, I think government need to make sure that it takes stock of all the projects related to electricity and energy in this country, and then study them carefully to see viability of those projects before embarking on just increasing the tariff”.
He viewed the government’s tariff adjustment exercise as a sign of failed privatisation in the power sector.
In his consideration, the government should play the role of regulator, as privatisation should provide an exit point for the government because when you privatise, you have no business to come and fix prices, which means that the privatisation is not in order.
According to him , the issue of privatization is clear fraud, “This appears to me that the privatization has not been properly sealed up nor properly done. If it has been done properly we will not see direct involvement of the government in fixing the tariff.
On supply deficiency, he said many states in Nigeria, stay in darkness for days without electricity, and yet they are being asked to pay. So I think, government needs to do its own homework. It shouldn’t be just everything about increasing and imposing additional payment on the people.
Recall that the director general of the Manufacturers Association of Nigeria, MAN, Segun Ajayi-Kadir, had urged the federal government to ensure that at least 90 per cent of electricity consumers are metered to enhance consumption reflective electricity bill payment., warning that cost of products produced in the country would go up and this will increase the prices of goods and services should the government approve upward adjustment in electricity tariff.
He regretted that over the past decades, the Nigerian power sector has encountered much turbulence in its electricity value chain due to poor policy enforcement, over-regulation, instability of gas supply and bottlenecks in its transmission network.
These problems he said have culminated into erratic electricity supply, frequent power outages and persistent collapses of the national grid.
Ajayi-Kadir, said that for many years, the situation has stunted the growth of the economy because access to electricity has remained a hurdle for millions of Nigerians.
Ajayi-Kadir, stated that, it is highly concerning for manufacturers to witness the electricity tariff skyrocketing beyond the present embattling high prices, starting July 1, 2023, saying that a 40 per cent hike at this time is simply outrageous.
He lamented that the absence of stable, effective and fairly priced electricity supply in Nigeria has been a long-standing challenge for manufacturers.
