Tinubu's silence on electricity hike worries Nigerians

President Bola Ahmed Tinubu’s silence over the recent 240 per cent electricity tariff has raised concerns among Nigerians.

According to reports, the hike in electricity tariff has become a burden on citizens who are already hinged by the hardship in the country as a result of the subsidy removal and the floating Naira.

The announcement by the Nigerian Electricity Regulatory Commission (NERC), that customers under Band A, who are getting 20-24 hours power supply will be made to pay more electricity tariff, displeased many Nigerians.

Reacting to the disagreement, Minister of Power, Adebayo Adelabu said on Friday, April 5, 2024, that 85 percent of electricity will not be affected.

Adelabu said that this move will enable the government to save N1.14 trillion in electricity subsidies.

The Nigeria Labour Congress, Trade Union Congress, Lagos Chambers of Commerce and Industry, and Abuja Chambers of Commerce and Industry condemned the new electricity hike, saying implementing the hike amid economic hardship is unwarranted.

The hike in electricity comes at a time when the power supply remained epileptic nationwide.

It was recorded that the national grid has collapsed three times since January 2024 and power supply has dropped immensely as a result of gas constraints.

A list compiled by NERC states that the eleven Discos have 481 Band A feeders, which supply consumers with at least 20 hours of electricity.

Meanwhile, electricity consumers under B, C, D, and E bands get 16 hours of power supply and below.

Wumi Iledare, Professor Emeritus in Energy Economics and Executive Director of Emmanuel Egbogah Foundation, said in an interview with DAILY POST that the electricity tariff hike and gas price increase seem skewed to optimize producer surplus rather than consumer surplus.

He was of the view that there seems to be no penalty attached yet for Discos benefiting from the sudden rise in tariff and not delivering.

“New tariff is perhaps based on the increase in the wellhead price for natural gas for power generation.

“However, we must agree that N68 per KWh is a price ceiling significantly below the market clearing price. So, there are shortages due to high electricity demand at low prices.

“N68 is also not anywhere close to the fair return price of an economic good with decreasing marginal cost and average cost curve. It’s not even the socially optimal price of electricity either.

“So, NERC had to do something apolitical, which ought to have been done long before now, but for institutional capture and political expediency that has seemed to be good judgment for too long. So, it is better late than never. I guess the commissioners have come to understand these facts better than before.

“Of course, the accuracy of the tariff is speculative because of the many unknowns. It is perhaps arrived at based on assumptions and facts within the context of the pricing model applied.

“As more facts become available, the pricing model will be recalibrated in a self-adjusting manner. If what I am reading in the media is correct, there is a price discrimination application based on daily supply hours. Such a mechanism is not unusual in a segregated market structure in the power market.

“Looking at everything done so far within the last month in 2024 to spur up gas to power value chain, the presidential executive order 40, the increase in wellhead natural gas price by the Nigeria Petroleum Regulatory Authority, and discriminatory electricity tariff, the benefits seem to be skewed to optimize producer surplus than consumer surplus.

“Finally, regarding my take or endorsement, the biggest challenge with the implementation is how to properly distinguish the targeted class with the ability to pay and ensure 20+ hours of power supply to them.

“There seems to be no penalty attached yet for Discos benefiting from the sudden rise in tariff but not delivering. The ability to implement price discrimination is doubtful”, he told DAILY POST.