Citizens and several groups have berated the Nigerian Electricity Regulatory Commission (NERC) over its recent hike in electricity tariffs. A diverse section of stakeholders who reacted to the hike described it as unjust, unfair and insensitive, considering the harsh economic realities in Nigeria. As anger and condemnation trails the hike, NERC has been busy offering explanations. The Commission said only total of 1,974,385 electricity consumers would be affected by its recent tariff hike, .
The Explainer gathered that the tariff hike aims to significantly reduce the estimated N2.9 trillion electricity subsidy in the 2024 fiscal year. It was further learned that the hike became inevitable due to cash flow constraints arising from the FG’s inability to meet obligations to the Nigeria Electricity Market.
On April 2, NERC increased electricity tariffs for Band A customers by 230 percent, from N68 per kilowatt-hour to N225/kWh. Band A customers are those who receive an average daily electricity supply of 20 hours or more. With the new order issued by NERC, Band A would no longer enjoy Federal Government subsidies on electricity.
NERC stated yesterday that subsidy payments across the bands have become unsustainable. It will be recalled that since July 1, 2023, President Bola Tinubu had frozen electricity tariffs at December 2022 levels with a promise to pay the difference as subsidies. However, the government has so far failed to pay any amount to the market, leading to the accumulation of N3.5 trillion in debts to power generation companies and gas suppliers.
Mr. Musliu Oseni, the Vice Chairman of NERC, told journalists in Abuja yesterday that to ensure only customers who receive at least 20 hours of electricity daily are in Band A, the number of feeders meeting the threshold has been reduced from 875 to less than 500. He explained that only 15 percent of the 13,162,572 electricity customers nationwide would be affected by the tariff increase, while the remaining customers would continue to pay the old rate until supply improves and they are migrated to the new Band A.
NERC expressed hope that the additional revenue would attract investments into the sector, adding that it would deploy several tools to ensure customers in Band A receive the daily hours of supply from electricity distribution companies (DisCos).
He stated that the cost of electricity has significantly increased since the Multi-Year Tariff Order 2024 took effect on January 1, stressing that the government’s decision to increase the price of gas to power from $2.18/MMBTU to $2.42/MMBTU and the rise in the foreign exchange rate were major factors in the review. He noted that because the tariff payable by customers remained the same despite these changes, the performance of generation companies was affected because they could not pay for gas.
Meanwhile, stakeholders, economists, and industry experts have been reacting to the tariff increase, noting that it would result in high utility bills, a gross reduction in consumers’ disposable income. They stated that the move will similarly add to the high operational costs for businesses, which would translate to higher prices of goods and services.
Reacting to the development, Dr. Tommy Okoh, Deputy President of the Trade Union Congress of Nigeria (TUC), said the hike is unacceptable and a recipe for unrest, urging the government to allow the poor to breathe. According to him, “the hike in electricity tariffs from 66/kWh to 225/kWh for people who enjoy electricity supply for 20 hours per day is totally unacceptable and a recipe for unrest.
“This shows clearly that Nigeria is not ready for 24-hour electricity supply. As we speak, you cannot point anywhere in Nigeria where people are enjoying 20 hours of electricity supply, not even at the airport where it is expected for economic reasons. We think the government has goofed again, especially at this time of socioeconomic challenges where the cost of living is very exorbitant and the salary of the workers remains static.
“Today, we are still battling with the fuel subsidy removal without any corresponding remedy, and yet the increase in electricity tariffs without the supply of electricity. This government should know that they were not voted into office for the enslavement of the citizens but to protect and better the lots of the masses. This is an indication that the poor can no longer breathe.”
Senior Civil Servants Reject Hike in Electricity Tariff
Etim Okon, the National President of the Association of Senior Civil Servants of Nigeria (ASCSN), has decried the hike in electricity tariff in the country, saying that the new rate was totally unacceptable.
He described the new policy as anti-people and a case of misplaced priority on the part of the government.
“This shows clearly that Nigeria is not ready for 24-hour electricity supply,” Okon said.
I think that the policy is not right, especially at this time of socioeconomic challenges where the cost of living is very exorbitant and the salary of the workers remains static.
“Today, we are still battling with the fuel subsidy removal without any corresponding remedy, and yet the increase in electricity tariffs without even the supply of electricity.
Similarly, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said: “The power sector issue has become a major conundrum in the economy. There is a major funding and liquidity crisis which is posing a significant risk to investments in the electricity value chain.
“Costs across the chain have been rising as a result of multiple macroeconomic headwinds.
Meanwhile, Clifford Egbomeade, a Communications & Economy expert, said: “The recent decision by the government to increase electricity tariffs by approximately 230% carries significant economic implications for both businesses and consumers alike.
One immediate effect is the rise in operating costs for businesses, particularly those with high energy consumption, such as manufacturing industries. This could lead to reduced profitability and potential layoffs as businesses seek to offset the increased expenses.
Moreover, higher production costs may ultimately be passed on to consumers in the form of higher prices for goods and services, thereby impacting consumer purchasing power and potentially contributing to inflationary pressures in the economy.”
Commenting as well, the Peoples Redemption Party (PRP) said the decision of the Federal Government to increase electricity tariff by 300 percent was not only insensitive but demonstrated a blatant disregard for the plight of the citizens.
The Acting National Publicity Secretary of the party, Muhammed Ishaq made available to The Explainer on Thursday, said the policy would result in the power companies raising prices of electricity from N68 to N200 per kilowatt-hour.
The party said the drastic hike, coming on the heels of the removal of fuel subsidies and massive devaluation of the Naira, which have brought increases in the costs of living and resultant hardship to the populace, was an unconscionable burden on the already struggling Nigerian populace.
It said it was unimaginable that the government would impose such life-frustrating policies on a nation that was already on its knees.
“The PRP, therefore, called on the government to reconsider this decision and prioritize the well-being of its citizens.”
