‘Why electricity tariff will go up’

There are strong indications that electricity tariff may increase soon. While electricity tariff review (increase or decrease) is a bi-yearly exercise as provided for in the Multi-Year Tariff Order (MYTO) schedule in the sector, the expected increase is not unconnected with the deregulation of the foreign exchange (Forex) market by the Central Bank of Nigeria (CBN).

Under the MYTO 2022, operators sourced forex at N441 to a dollar for purchase of equipment and especially gas needed for operations, but with the floating of the exchange rate, which yesterday exchanged for N756 to a dollar, the limit of exchange is no longer feasible.

Efforts to get the Distribution Companies (DisCos) to confirm the looming increase have proved abortive. The DisCos insisted that they did not know or received any directive on such an increase.

“We have not been advised or directed on such. The Nigeria Electricity Regulatory Commission (NERC) is the only body that can order us on tariff review, and we have not received any correspondence on this from NERC. So, we are also watching the speculation that has rented the air,” a top management source in a leading Lagos-based DisCo told this reporter.

The sources, however, noted that going by the development in the forex market, consumers needed to be aware that what operators budgeted for at the old exchange rate of N441 to a dollar has since spiked meaning that more money is expected to be pumped into providing the required service to consumers.

The General Manager, Public Affairs of NERC, Dr. Usman Abba-Arabi, could not be reached on phone for confirmation, while messages sent to his Whatsapp number had not been responded to as at the time of going to press.

Analysts were worried that based on the prevailing floating exchange rate, a base tariff of N100 per kWh might be set given that the forex rate has almost doubled from the time it was pegged at N441.