The average ‘Band A’ customer in Nigeria will now need as much as N170,000 for electricity per month, instead of the average of N50,000 that they were paying before now.
This follows the approval of a 240 per cent increase in the tariff of ‘Band A’ power customers from N66 per kilowatt hour (KwH) to N225/KwH starting from this month.
The Nigerian Electricity Regulatory Commission (NERC) yesterday approved an increase in the rate paid per Kwh of electricity from about N66 to N225 for the various distribution companies (DisCos) in the country.
Vice chairman of NERC, Musliu Oseni, speaking at a press briefing in Abuja on Wednesday, however, said the increase in tariff will only affect customers enjoying 20-hour power supply and above across the country. Other customers in Bands B, C, D and E who consume less than 20 hours of electricity per day are not affected by the increase.
NERC also stated that only a fraction of the over 3,000 DisCos’ feeders, that is fewer than 481 feeders, will be impacted, and this represents 15 per cent of the over 12 million electricity customers captured in the Nigerian Electricity Supply Industry (NESI).
Oseni also revealed that NERC had also ordered that the majority of the feeders which did not previously meet the 20-hour supply threshold be downgraded to lower bands.
“We currently have over 800 feeders that are categorised as Band A, but it will now be reduced to under 500. This means that 17 per cent of the feeders now qualifies as Band A.
“The commission, using technology, discovered that many of the feeders that the Electricity Distribution Companies currently brandish as Band A are not meeting the required service and as such the feeders were ordered to be downgraded immediately as a way of protecting consumers,” he said.
According to him, as part of enforcement mechanisms to ensure that areas affected by the review get the 20 hours supply, DisCos have been mandated to set up rapid response teams in locations where the feeders are located.
“This is to ensure that the customers can have access to the DisCos. They have also been mandated to publish the contact of the rapid response team where the customers are located.
“Failure to meet the commitment for seven consecutive days, the feeder will be downgraded immediately to the service level the DisCo is able to provide electricity to the feeder,” he said.
Oseni said where a DisCo failed to meet the commitment for two days, by the third day at 10am, the company must publish an explanation also via bulk SMS contacting the affected consumers on the feeder.
“They should explain why they could not meet the service for the two days and also submit the explanation to the commission,” he said.
LEADERSHIP reports that the Labour associations and the concerned public had advised the government not to remove electricity subsidy as canvassed by the International Monetary Fund (IMF).
In its recent report entitled ‘IMF Executive Board Concludes Post Financing Assessment with Nigeria,’ the IMF reiterated the importance of eliminating the subsidies to redirect resources towards more targeted and impactful social welfare programmes.
Amidst the prevailing cost-of-living crisis, the IMF proposed targeted social transfers to provide temporary assistance to the most vulnerable segments of the Nigerian population.
LEADERSHIP reported that the government may have concluded plans to hike electricity tariff to relieve pressure on fiscal spending. The federal government had now reduced electricity subsidies for 15 per cent of consumers to reduce its N3.3 trillion ($2.6 billion) cost, part of a series of reforms to ease pressure on public finances.
With the recent price hike, LEADERSHIP analysis indicates that an average Band ‘A’ consumer with the following appliances: one deep freezer, one fridge, three fans, two air conditioners, 15 bulbs, one pressing iron, one microwave oven and one electric kettle, who needed an average of N50,000 monthly to power his or her appliances before now, will now need N170,000 on the average to power his home, due to the new 240.9 per cent increase in tariff.
Also, the N50,000 electricity expenses, which could previously provide 757.57KwH or units, will now purchase only 222.2KwH or units.
Justifying this extra charges which will put further strain on the finances of many Nigerians, the NERC explained that these premium customers can now comfortably reduce or completely do away with their expenses on diesel and petrol generators as they will be enjoying quality power supply of 20 hours or more.
Oseni also gave assurance that where the stipulated hours are not fulfilled by the DisCos, the customers will be downgraded to lower bands.
Reacting to the new tariff regime, Labour groups and electricity consumers have frowned at the decision of the federal government to hike electricity tariffs for customers in Band A across the country.
This is even as Nigeria’s manufacturing sector is considering establishing its own power generation facility to cushion the effect of the new tariff announced by the federal government.
While the leadership of Nigeria Labour Congress (NLC) has warned the federal government against plunging Nigerians into further hardship amidst the current cost of living crisis, electricity consumers, especially Small and Medium Enterprises (SMEs) have said such increase in electricity tariffs will lead to higher operational costs, coupled with the fact that so many goods and services are already on the high side at the moment.
NLC said additional hike in electricity tariff despite the poor supply at this critical time will not be a good decision.
The union noted that, with Nigerians trying to survive the current economic realities, a good government ought to think of how to address the their immediate needs rather than embarking on an over 300 per cent hike in electricity tariff.
NLC acting deputy general secretary, Comrade Ismail Bello, in a chat with LEADERSHIP, reiterated the earlier call by Labour against privatisation of the sector.
He said, “What is happening now is reconfirmation of what we told the general public and federal government during the privatisation period – that privatisation was not the solution to the problem in the sector.
“During the clamour for the privatisation, we told the government the ills of privatisation but they went ahead against the wish of Labour. We then warned the government that privatisation without good services will have effects on the population.”
Comrade Bello called on the government to have a rethink on the hike as it will add additional burden on the already suffering citizens, and push more Nigerians under the poverty bar.
‘What Nigerians need most at this period is to address the current economic realities rather than pushing them into more hardship with further hike in electricity tariff,’ he said.
Speaking with LEADERSHIP yesterday, the immediate past chairman of the Apapa branch of the Manufacturers Association of Nigeria (MAN), Frank Onyebu said that, already, manufacturers are incapacitated by irregular supply which makes in-country produced goods not competitive. He stated that the decision is ill-timed and insensitive given the prevailing economic situation in the country.
According to him, stakeholders were not properly carried along in the hurried decision, and the manufacturers’ association may have no option but to fast-track the establishment of its power generation facilities.
According to him, since the government is not considering the plight of the informal sector, they will take strategic steps to support their businesses.
He recalled that the International Monetary Fund (IMF) had been pushing for the hike which had met resistance from Nigerians but lamented the government had chosen to move along in that direction.
Onyebu, who is also the managing director of Universal Luggage Limited, said corruption is endemic in the management of electricity and petroleum industries.
Government, he said, should rather begin to think of how to boost food production and deploy infrastructure to support economic activities, noting that there is nothing to signify that money realised from petrol subsidy removal has been well utilised whereas the cost of running government is rising daily.
In his reaction, the convener of PowerUp Nigeria, Adetayo Adegbemle, said the increment is a long time coming.
“We have spoken so much about the federal government not being able to continue to carry the huge subsidy on electricity, and this is them acknowledging everything we have been telling them,” he said.
According to Adegbemle, the hike is not about helping the distribution companies, but it is about appropriate pricing for electricity.
He argued that this pricing is also along the whole value chain.
“You will recall that gas pricing also recently changed, so there’s no way the price of electricity will remain the same, especially with all macroeconomic indices having also increased.”
“We also need to understand that the power sector is mostly a private concern now, and it is no longer a government utility; so appropriate pricing is needed for us to see the growth of the industry,” he noted.
On adequate metering, he said the regulatory commission spoke about metering initiatives by the government, and at this point it is important that these metering initiatives are pushed through.
“We are also asking that institutional financing should be encouraged through regulations, maybe amending the MAP Regulations so that the huge metering gap can be closed up,” he added.
On his part, the chief executive officer (CEO) of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the power sector issue had become a major conundrum in the economy, stating that there is a major funding and liquidity crisis which is posing significant risks to investments in the electricity value chain.
“Costs across the chain have been rising as a result of the multiple macroeconomic headwinds. Meanwhile, the system is not generating the desired liquidity to match the escalating costs. Tariff review is thus an inevitability, but a 300 per cent increase in one fell swoop is difficult to justify,” he said.
He, however, expressed relief that the increase is not across board as only 15 per cent of electricity consumers are affected, targeting the segment with the highest ability to pay, which reflects some attributes of equity in pricing.
Dr Yusuf pointed out fundamental issues that need to be addressed in the electricity value chain.
“There are issues of technical and commercial losses which are yet to be addressed. These are inefficiency costs that consumers are compelled or expected to pay for as part of the cost recovery argument. And these costs are in billions of naira.
“There is also the exploitative practice of estimated billing. Millions of electricity consumers are yet to be metered,” he stated.
He noted that there is the problem of over centralisation of the power supply through the national grid model, saying there are capacity issues with some of the electricity distribution companies which contribute to the lapses in electricity delivery outcomes.
“The energy mix programme is yet to gain an impressive traction. It is important to fix these fundamental issues in the power sector. Fiscal policy measures should be immediately deployed to reduce costs across the entire electricity value chain,” he added.
A consumer, Sylvanus Okpara’ stated that for small and medium enterprises (SMEs), an increase in electricity tariffs will lead to higher operational costs coupled with the fact that prices of commodities are on the high side at the moment.
“This will have an adverse impact on their businesses, competitiveness and profitability, potentially leading to job cuts or reduced expansion opportunities,” he said.
He urged the government to ensure that vulnerable populations are not disproportionately affected, even as he decried the suddenness of government policies.
A project manager, Adeniyi Julius, noted that the increment will affect low-income families who find themselves in the category of those that would be affected as they are already financially strained.
According to him, “Low-income families may find it challenging to cope with higher electricity bills. This could lead to decreased usage of electrical appliances, affecting their quality of life and productivity.”
He, however, said the social and political implications cannot be ruled out as Nigerians are going through a lot.
“Electricity is a basic necessity, and any perceived unfairness in tariff increases can lead to public discontent and protests,” he stressed.
Similarly, a resident of Gbagada, Lagos, Blessing Oladipo, said she was not in support of the increase in the electricity tariff.
She queried “Is it the light that is almost nonexistent they are increasing the amount per kilowatt? I don’t even know what they are trying to do.
“For hours and days, we could not see a blink of light. We use prepaid metres. Since the beginning of February, we have hardly seen light. Phones and other appliances will be off for hours without a power source. I don’t know, if you ask others their story may be different, but for me, that has been my experience, and I do not buy into it.”
Also, an Ogun State resident, Ola Michael said increasing the electricity tariff is not a prudent decision at present.
“It would place undue strain on the populace given the current state of the economy. Furthermore, the inadequate lighting situation is unlikely to encourage compliance with any proposed price hike,” he said.
