Electricity Tariff Hike: What’s Next for Nigerian Consumers?

Electricity Tariff Hike: What’s Next for Nigerian Consumers?

The looming electricity tariff hike in Nigeria has raised alarms, with power consumers strongly opposing the proposed increase of over 66%. The new tariff would see the price rise from N116.18 to N193.63 per kilowatt-hour (kWh), a sharp jump that many believe could push already struggling Nigerians further into economic hardship.

According to Olu Verheijen, Special Adviser to President Bola Tinubu on Energy, the increase is necessary to reflect the actual cost of supplying electricity in Nigeria. Verheijen stated that the hike would help attract private investment into the sector, which is essential for improving infrastructure, maintenance, and power reliability.

The Government’s Rationale: A Tough Pill to Swallow?

Verheijen emphasized that the rise in electricity prices, which will need to be balanced by subsidies for lower-income consumers, is required to sustain the sector’s future. “Higher electricity tariffs are necessary to fund the maintenance needed to improve reliability and attract private investors,” she explained. However, the government is facing mounting pressure as it acknowledges that the subsidy system is no longer sustainable.

The Nigerian Electricity Regulatory Commission (NERC) has hinted that all customers, except those in Band A, should brace for a cost-reflective tariff soon. A senior NERC official stated, “The government can no longer shoulder the responsibility of paying subsidies. It is no longer sustainable.”

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What’s at Stake for Consumers?

The tariff increase would primarily affect consumers in Band B to E, who are already struggling with inconsistent power supply. While Band A customers benefit from a minimum of 20 hours of power supply daily, those in lower bands receive far less, often facing long outages. With only 4-5GW of power available for homes and businesses, the country’s power generation capacity is far below the demand, exacerbating the problem.

This disparity in power supply has sparked outrage, especially since many customers are still without meters, making them susceptible to arbitrary billing. Adeola Samuel-Ilori, the Coordinator of the Electricity Consumers Protection Forum, has criticized the government for pushing through tariff hikes without addressing the critical issue of metering. He emphasized that, according to the Electricity Act, distributors (DisCos) are legally obligated to provide meters to all customers at no cost.

The Public Pushback: A Growing Outcry

The anger surrounding the tariff hike is palpable. Princewill Okorie, Executive Director of the Consumer Protection Advocacy Centre, voiced his concerns, calling the move “an attempt to impoverish Nigerians already struggling to make ends meet.” Many fear that the tariff hike will only serve to make life more difficult for those who are already suffering from limited access to electricity and exorbitant costs.

Further, Okorie questioned the role of the Federal Competition and Consumer Protection Commission (FCCPC), which he believes has done little to protect consumers from exploitation by the power sector. “What is the FCCPC doing to protect consumers?” he asked.

A Possible Solution: Investment for Growth

On the flip side, energy experts like Tayo Adegbenle, founder of PowerUp Nigeria, argue that the tariff hike could be beneficial for the sector’s long-term growth. Adegbenle suggests that Nigeria has sacrificed service quality and potential investment due to the unsustainable subsidy regime. He contends that the country needs fresh approaches to attract investment, and a cost-reflective tariff could be part of the solution.

While the government has been hesitant to confirm the increase outright, it’s clear that something needs to change. The current system is unsustainable, and with over 250 companies and institutions already bypassing the national grid, Nigeria’s electricity crisis is reaching a breaking point.

What Does the Future Hold?

The ongoing battle between the government and electricity consumers is one to watch closely. With increasing opposition to the tariff hikes and the government’s failure to fulfill promises to subsidize electricity costs, the situation is far from resolved. As the deadline for tariff adjustments approaches, the nation will face a difficult decision: Can Nigeria balance cost-reflective pricing with consumer protection and sector growth? Only time will tell.

Key Takeaways:

• Electricity tariffs are expected to increase by over 66%, affecting millions of Nigerians.
• The government’s rationale is to make tariffs reflect the true cost of power supply and attract investment.
• There’s significant public backlash due to unreliable power supply, the failure to meter customers, and the increasing cost of electricity.
• Experts suggest that while the tariff increase could help the sector, it needs to be accompanied by reforms, including better metering and infrastructure improvements.

Stay tuned as this issue develops and the government’s next steps are revealed.