…Action will be counterproductive—industry analysts
…govt should tell Nigerians the truth about the reasons for jacking up the tariff
…One who pays N5000 per week, and 25,000 per month, using the escalation factor, will now pay N85,000 per month
The increase in the price of electricity will certainly cause more problems than it would solve as the prices of basic items such as bread, pure water and other consumables may go beyond the reach of commoners.
This is because producers of such commodities whose electricity charges currently form between 30 to 40 percent of their production and who are in band A will have the tariff cost passed on to the consumers if they must remain in business.
For instance, a loaf of bread will increase from the current price of N1500 to anywhere between N2,000 and N2,500
(ii) Similar price increases of other goods and services should be expected
(iii) Inflation will also increase making the cost of living more acute
Another implication of these price increases is that anybody who is on band A who is currently paying N5000 per week and 25,000 per month will now be paying N85,000 per month using the escalation factor of 3.41
More companies and businesses may close down because if they produce and cannot sell their goods they will be forced to close shops. Many of the time industries declared a fall in their revenue in the last year fiscal year and now the situation is going to compound their problems
Some industry analysts have queried the rationale behind the action. They asked whether the act is about fiscal reality or economic efficiency. They argued that the action is not about trying to make the power sector more efficient but rather an attempt by the government to meet with the shortfall in the budgetary allocation which amounts to about N130 billion per month and about N1.6 trillion per year.
This year the government made a budgetary allocation of about N450,000, but it knew that this would not be enough for the power sector. To bridge the gap, it decided to go through this route.
Analysts believe that this action would not solve any problem but would drive inflation and shoot up the prices of goods and services. Hotels will make people pay more for conferences, seminars, training and so on.
People should not be forced to pay for the inefficiency in the power sector.
One of the questions people are asking is whether the government is increasing the tariff because it can no longer pay subsidy. How much did the government spend on subsidy last year and how much did it budget for power this year? Will power supply and Tariff stabilize with this action?
According to them, one of the implications of the increase in tariff would be that there will be a demand reduction, and for the discos to meet up with a set tariff target they will continue to increase the price of those that are paying.
Industry operators want the government to come out clean with the conversation regarding this development.
Meanwhile, the Nigerian Electricity Regulatory Commission NERC has said it allows the new Tariff Increase to allow DisCos to pay for gas, maintain machines
The vice president of NERC said that the Commission is empowered by its Act to ensure that the licenses operating efficiently are allowed to recover sufficient revenue for the capital invested
Vice President of NERC, Musiliu Oseni, stated this when he appeared on Politics Today on April 3, 2024.
He explained the reasons behind the increase in electricity tariff for Band A customers.
The increase, which was announced by NERC earlier on Wednesday, will see customers pay ₦225 kilowatts per hour, up from the current ₦66.
Mr Oseni while explaining this on Channels Television’s Politics Today on Wednesday. said that the Commission is empowered by its Act to ensure that the licenses operating efficiently are allowed to recover sufficient revenue for the capital invested, for the operational cost as well as having a return for the investment they have made.
Oseni further said: “What informed the decision actually apart from the position of the Act is in the sense that if you look at December 2023 there was an improvement to the quality of service to January but from January up to date, there was a dip in generation availability.
“What caused that was because there was no review of tariff. The DisCos cannot be mandated to pay for what they have not been allowed to charge and in that case, the payment to generation companies has significantly dipped which affects their ability to maintain their machine and also to pay for gas.
“And if they are not able to pay for gas definitely, they won’t be able to generate not minding the fact that they also need money to maintain their machines.
“So, we are at a point where it is clearly that if nothing is done to ensure that tariff is reviewed so that the market can be relatively liquid the quality of supply won’t improve.”
Oseni also explained that the tariff review affects only band A customers because they receive about 20 hours of electricity daily.
He, however, said that before the tariff increase, the Band A category was reviewed down from over 1000 feeders to 481 feeders out of total of 3000.
According to him, this is about 20 percent of the total customers.
“We currently have 800 feeders that are categorised as Band A, but it will now be reduced to under 500. This means that 17 percent now qualify as Band-A feeders. These feeders only service 15 percent of total electricity customers connected to the feeders.
“The commission has issued an order which is titled April supplementary order and the commission allows a 235 kilowatt per hour,” Oseni said in a press briefing announcing the new tariff earlier in the day.