Controversy trails ‘plans’ to increase electricity tariffs

There have been controversies over reported plans by Nigeria’s electricity Distribution Companies (DisCos) to implement an increase in tariffs, leaving Nigerians deeply concerned about the potential impact on their lives.

The uncertainty surrounding the proposal has generated concerns among consumers and key institutions in the industry.

On 25 June, Daily Trust reported that DisCos, in a note to their customers, had informed of an increase in electricity tariff effective 1 July.

The DisCos statement suggested that the tariff increase is a response to the floating of the naira and aims to ensure that the electricity industry remains financially viable and sustainable in the face of currency challenges.

“Under the MYTO 2022 guidelines, the previously set exchange rate of N441/1 dollar may now be revised to approximately N750/1 dollar, impacting the tariffs associated with your electricity consumption.

“For customers within bands B and C, with supply hours ranging from 12 to 16 per day, the new base tariff is expected to be N100 per kWh while Bands A with (20 hours and above) and B (16 to 20 hours) will experience comparatively higher tariffs.

“For customers with a prepaid meter, we encourage you to consider purchasing bulk energy units before the end of this month as this will allow you to take advantage of the current rates and potentially make savings before the new tariffs come into effect. For those on post-paid (estimated) billing, a significant increment is imminent in your monthly billing, starting from August,” Daily Trust quoted the AEDC statement.

IKEDC and EKEDC were also reported to have released similar press statements.

But on Monday, AEDC informed its customers to disregard the publication saying it was yet to get approval to commence the tariff hike.

“Dear Esteemed Customers, Please disregard the communication circulating in the media regarding the review of electricity tariffs. Be informed that no approval for such increments has been received,” the company said in a Twitter post.

As of Tuesday morning, none of the DisCos has confirmed that they officially released the statement.

Several efforts to contact the DisCos, the Association of Nigerian Electricity Distributors and the regulatory body, the Nigerian Electricity Regulatory Commission, to speak officially on the matter proved abortive.

However, one of the officials of NERC, who sought anonymity on the grounds of not having the authority to speak with the press, confirmed that the tariff is being reviewed, and the body will not make any official statement until there is a resolution on the new rate.

“The process is ongoing and cannot be communicated until completed. Whatever is being publicised now are mere speculations because you don’t speak mid-way through a process; the review could turn out to be a reduction in tariff or increment, no one knows for sure,” the official said.

The NERC’s basis for this review is based on the MYTO 2022 guideline, due for its minor bi-annual review by June/July.

MYTO 2022 guideline

The MYTO is a framework NERC uses to determine electricity tariffs in Nigeria. Its guidelines provide a structured approach to calculating and reviewing tariffs to ensure transparency, cost recovery, and sustainability in the power sector.

It provides a 15-year tariff path for the Nigerian electricity industry and undergoes regular reviews to account for changes in factors such as inflation, U.S. dollar exchange rate to naira, gas price and generation capacity.

Major reviews are conducted every five years, during which all inputs are reviewed in consultation with stakeholders, while the minor reviews are done bi-annually, which involve collecting actual data from the National Bureau of Statistics, Central Bank of Nigeria and System Operations Unit of Transmission Company of Nigeria.

Policy Impact

The bi-annual review is coming when Nigerians are already overwhelmed with a series of policy resets made by the new administration.

Since he assumed office on 29 May, President Bola Tinubu has seen the implementation of major economic policies that have affected purchasing power. Although long sought by investors, experts and global development organisations, many Nigerians have had a hard time coping with the ripple effect of the policies.

At his inaugural address at Eagle Square, Abuja, the president declared that there would no longer be a petroleum subsidy regime as it was not sustainable.

The removal of the subsidy led to an over 100 per cent increase in petrol prices nationwide, as Nigerians struggled with the multiplier effect of the policy.

Similarly, the Central Bank of Nigeria, on 14 June, announced the unification of all segments of the Nigerian forex market, collapsing all windows into the Investors & Exporters (I&E) window.

As a result, the value of the naira has dropped significantly, reaching as low as N770 to the dollar on the Investors and Exporters (I&E) foreign exchange window.

These developments reflect the impact of the local currency on the electricity sector and the need to adjust tariffs to account for the changing economic realities.

Caution

The Nigeria Labour Congress (NLC) recently warned against the planned increase, stating that the massive rise will not bode well for Nigerians.

“We believe that not even these figures are a justification for this reckless proposed tariff increase. The issue of capacity to pay and quality of service delivery is not only germane but superior to any rationalisation by market logic,” the Congress President, Joe Ajaero, said in a statement.

Also, the president of the Manufacturers Association of Nigeria, Francis Meshioye, in an interview with Arise TV, sought the reduction of electricity tariffs for manufacturing businesses.

“No increment on the tariff currently, rather the government should look at a way to give us special tariff on electricity to be able to mitigate overburdened expenses of expenditure of manufacturing industry in the country

According to him, the association currently spends up to 30 per cent on energy, and he urges a subsidy of up to 20-15 per cent to help competitiveness.

Shehu Sanni, a former senator, also called the development “soulless”.

“Some Power distribution companies have issued a notice of an impending electricity tariff hike; that is soulless.No reasonable person will support such a policy. Yes, we have wealthy people, but we are still a developing country,” he wrote.

“It’s unfair for the federal government to take off fuel subsidy, make plans to increase electricity tariffs and then hike 40 per cent in vehicle duties. They’re simply being unfair to Nigerians,” Mr Sanni wrote on Twitter.