Households under pressure as new electricity tariff due July 1

New electricity tariff takes effect from July 1, 2023

• Tinubu, NERC at crossroads as naira floating, inflation disrupt MYTO
• Energy cost may push households, SMEs’ spending to 70% amid unavailable electricity
• Stakeholders raise concerns over impacts on economy, poverty

Nigerians may need to brace up for tougher times as electricity tariff is set to increase by over 40 per cent in the coming days, a development which may eventually end all forms of energy subsidy in the country.

With a monthly subsidy of about N50 billion still in the electricity sector owing to revenue shortfall, the tariff hike due from July 1, may be another acid test for the President Bola Ahmed Tinubu administration’s market reform.

The administration has already removed subsidies on Premium Motor Spirit (PMS) and floated the naira, decisions that have complicated the price-setting of the Nigerian Electricity Regulatory Commission (NERC) 2022 Multi-Year Tariff Order (MYTO).

Although the power sector players have been unable to meet the threshold of supplying at least 5,000 megawatts a year after signing contracts with NERC, NERC’s current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent.

Going by the NERC’s orders, in 2015, the average tariff across distribution companies (DisCos) and classes of end-users was N25 kilowatt, in order of 198/2020, which came into effect on September 1, 2020. The average tariff went to N60 per kilowatt; in the MYTO for 2022, the average tariff was N64 across classes of customers.

The foreign exchange rate used in determining the 2015 tariff was N198.97/$, N383.80/$ was used in 2020, while N441.78/$ was used in 2022. The inflation used in the 2015 MYTO was 8.3 per cent, 12 per cent was used in 2020 and 16.97 per cent in 2022.

Currently, the inflation rate is 22.41 per cent and some experts have projected that it would hit 30 per cent by the end of June given the floating of the naira and subsidy removal on PMS.

Coming as the metering gap remained at over seven million, gas prices, losses and actual generation capacity are other elements in determining the tariff.

While NERC’s projected tariff for July 2023 was expected to remove subsidy and increase the previously frozen tariff band D and E, increasing the bands from N54.59/kilowatt to N62.16 for band D and N48.37/kilowatt to N61.16 on average with an average increase across the bands moving to N67/kilowatt, the prevailing floating of the naira and spike in inflation is projected to move the new average tariff to about N88/kilowatt for the sector to recover the cost.

Most stakeholders told The Guardian that while the increase is unavoidable due to the changes in the parameters, households and small businesses, which should power the economy, may head for serious problems with energy costs alone rising to over 70 per cent as purchasing power remains a challenge in the face of unemployment and poverty.

At the time of filing this report, available electricity on the grid stood at 3,057.7MW from 17 power plants. The average load intake of all the DisCos in the last four months averaged 3,000MW, a development that follows the persistent push to make the DisCos meet up with 100 per cent of their remittance orders.

With the question of affordability emerging as a major consideration as the grid remains unreliable, forcing it to make losses, stakeholders have expressed fear that Nigerian Electricity Supply Market may face tougher times managing outlook due to apathy that may come from consumers who are losing hope in the system and resorting to alternative energy.

Energy expert, Prof Wunmi Iledare, said the restructuring of the forex market creates worries as it appears as a devaluation of the naira, adding that he’s not comfortable blaming subsidy removal and paying the right tariff for decoupling Nigeria’s economy from forex instability.

According to him, people must support the government in its effort to stop the dollarisation of its economy even if electricity tariff and petroleum products prices rise to a not-too-comfortable market-clearing price.

Iledare, however, questioned the current energy pricing in the country, adding that the PMS pricing which stayed after the NNPC announcement is anticompetitive based on the dominant firm market structure.

“Price hike cannot just depend on forex in the electricity market. Market fundamentals are key to rate determination in a decreasing cost industry producing essential commodities, like power,” Iledare noted.

Energy lawyer, Madaki Ameh, said the never-ending upward reviews of power tariffs have become some sort of blackmail on electricity consumers and should be addressed through the Consumer Protection Council or an organized body of electricity consumers.

“Indexing the cost of electricity on the dollar is a huge mistake because most of the inputs for electricity supply are local. The DisCos are also holding Nigerians to ransom by failing to increase the supply base, thereby spreading the tariffs across a broader spectrum of consumers to reduce the unit cost of electricity,” Ameh said.

He insisted that as long as there remain many unmetered consumers and many others not connected to the grid at all, the few consumers on the grid would continue to be subjected to unjust tariffs, which are not reflective of the quality of service delivered.

Ameh hoped that the signing into law of the new Electricity Act would mark “the beginning of light at the end of the long tunnel of inefficient and epileptic power supply in Nigeria.”

President of Nigeria Consumer Protection Network, Kunle Olubiyo stated that while the last major review of electricity tariff was benchmarked at $1/N400, the floating of Naira and harmonisation of the exchange rate put the exchange rate at about N750/$.

“It will affect the tariff template and result in an upward review of electricity tariff.

“As important as this may be, two things are quite imperative to help in achieving a win-win for the demand and supply side of the coin.

Moving forward, governments through relevant regulatory institutions should liberalize end users’ customers ‘ access to effective metering and mass metering to help in drastically closing the ever-increasing huge metering gaps,” Olubiyo said.
He asked the government to look into gas pricing and align it with domestic gas obligations.

“Gas to power generation plants/ thermal plants should be allowed to access gas which should be traded in local currency,” Olubiyo said.

Electricity Market Analyst, Lanre Elatuyi said the new tariff rate would have an impact on the tariff, stressing that the “naira devaluation is a big challenge to companies with dollar loans to pay,” a development, which he said, would affect the power generators who have dollar loans repayment obligations.

“They will need more naira today to buy a dollar. They need to manage their exposure to foreign exchange risk. Even operators of hydro plants pay their concession fees in dollars. So, wholesale electricity price will be adjusted upward and this will get to the end users’ tariffs too,” Elatuyi said.

Executive Director at PowerUp Initiatives For Electricity Rights (PowerUp Nigeria) Adetayo Adegbemle said while increasing tariff appears normal due to the prevailing situation, there is a need to review the whole process and encourage basing the electricity tariff against the naira going forward.
“We have seen changes in the review yardstick before, and this could be an opportunity to review our tariff process,” he stated.

Former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of Economics at Babcock University, Segun Ajibola, said there is still a disconnect between the cost of electricity and the value exchange.
“Nigerians are still struggling to keep pace with the cost of energy for business and household use. If the electricity tariff goes up as envisaged, the question remains if there will be value for the quantum of electricity so paid for.

“The truth remains that if electricity supply is constant, of the right quantity and quality, the envisaged upward review in the tariff will be gladly absorbed by the populace,” he said.

Ajibola disclosed that the positive multiplier effects of a regular power supply in a country like Nigeria would more than compensate for the anticipated increase in electricity tariff when the increase is compared with the cost of alternative sources of energy to SMES, other businesses and households.

He noted that in the long run, the costs of some of the public infrastructures to the populace are expected to in the short run rise to the peak, then flatten and decline subsequently.

“I believe the short-run pains of the higher cost of hitherto subsidized public infrastructures will turn to long-run joy for the generality of Nigerians with improved quality of management and accountability in our government-owned suppliers of those services.

“The move to open up the production and supply of those items and services such as fuel, electricity and transportation is designed, I believe, to promote economic efficiency and accountability in making the products and services available for the generality of Nigerians.

And if the current efforts at driving such public sector accountability are sustained, which I believe the new administration has the wherewithal to do, then Nigeria is on the march towards greater greatness,” Ajibola said.

https://guardian.ng/news/households-under-pressure-as-new-electricity-tariff-due-july-1/

Before we all get carried away with the media propaganda, here are the summary of Tinubu's government to date:

1. Fuel subsidy is removed and you will buy fuel for 500 to 900naira per liter (depending on the exchange rate). The savings will be looted like that of kerosene and diesel. There will be no commensurate succor/ palliative for your suffering. Instead of going after the subsidy thieves and stopping the smuggling across boarders, they have transferred the responsibility to the helpless Nigerian people.

2. Naira has been devalued (though they call it floating). The FG has handed over the exchange to the market forces where speculators and banks are king. Naira continues to fall in the I/E and parallel market. Anybody who tells you Naira will appreciate is a joker, for a corrupt country like ours, the banks and speculators are the new cabal and will drive the rates how they deem fit. Don’t believe…. Just observe. What most don’t get now is that CBN now has no obligation to provide FX at a particular rate to the market, as such the new FG players can access FX from CBN without noise.

3. FG funding for tertiary education has been removed. Students will pay upwards of 400K tuition fee starting next session. A lot of students will drop out and cannot complete their education anymore. The so-called student loan will be almost impossible for an average student without connection to access. Guess what happens to the savings from this funding…. To be looted by the same people who have impoverished the nation.

4. Electricity tariff have been increased (without increased production) and will take effect from July 1st. This is a death knell to small and medium scale businesses. You are now stuck between the devil (PMS at 550naira per liter) and the blue sea (extra expensive electricity tariff).

5. All the FG has done so far is abandon almost all responsibilities it has over the people through the bills being signed since May 29. All Tinubu has done is to make available funds to be shared by him and his goons at the expense of the people. Not a single bill or action aimed at ameliorating the suffering of the already downcast Nigerian people rather adding to the pain in the guise of elitist policies

6. Guess what…. None of these policies have any impact on the political class and they have not made a single sacrifice. Same old political criminals are back in power, Gbaja, Akume, Asari Dokubo etc and you expect any real change apart from increased suffering?. How do you expect Tinubu to pay back the these same criminals who supported him into power?

Nigerians…. Suffer no dey tire una?

Fuel subsidy gone , now increase in electricity tariff. Okay o, let us see how much Nigerians can bear

GoodBoi1:
Fuel subsidy gone , now increase in electricity tariff. Okay o, let us see how much Nigerians can bear

Nigerians are in love with their oppressors. Doubt me?, look around you .... if you are nice to a Nigerian, he calls you mumu while they refer to the mean men as strong men

GoodBoi1:
Fuel subsidy gone , now increase in electricity tariff. Okay o, let us see how much Nigerians can bear

Like fuel subsidy..🤣🤣

Nigeria should allow the poor breeeeefftt!!!

Lol no breathing space for the poor...

Tinubu will replicate Lagos Nationwide. Lol. Una go see shege

Condolences to the poor. They'r really suffocating

Hehehehe. I give Nigerians 6 months to understand the mess they are IN

If you are a prepaid user, better buy tokens that can last at least for 4 years.

agbadorians will get it far less. just go get your agbadorian ID card, with it you will get fuel and electricity at 70% discount!

you will even get student load without needing any guarantor!

just get your agbadorian ID card!

Just imagine how selfish these ediots are. You come in and the first thing is to remove all subsidies enjoyed by the masses. They claim they are removing subsidy on petrol because it was being smuggled to neighboring countries. What is the excuse for the removal of subsidy on electricity and education. Next they will target is Healthcare

anonymous1759:

Data on 44 countries collected by the Organisation for Economic Co-operation and Development (OECD), an intergovernmental group, showed that a total of $178 billion was spent by these countries in 2019 to subsidise energy products. $12 billion was spent on coal, $21 billion on electricity, $13 billion on natural gas, and the largest amount, $131 billion, was spent on subsidising petroleum.

You people will just sit in your houses and try to sell the useless propaganda the govt sells you. Countries subsidize education, Healthcare, agriculture and energy because these are the sectors that drives the economy.Try to use Google which is free

Tulumbu nikan lo ma se.

He is doing it. He hasn't made a down payment for agbado that we will use for electricity yet.

We will all be alright las las.

Another Anti-people policy....

Is Tinubu's aim to increase the 133m below poverty threshold or the over 10m out of school children?.. how would this policy not increase the over 80% unemployment and underemployment data in Nigeria...

What ever happend to cutting cost of governance?..

Control that which you can control. You really are not helpless.

Only use low energy 5watt or not more than 10 watt bulbs.

When you buy fridges and /or freezer check for low energy usage or those with inverter. Same for AC. Be intentional about everything you do and you will see that things are manageable.

There is a lot of wastage in the use of electricity.

Good move it will reduce our population, many go die of poverty

Tinubu is working.
God bless asiwaju

Na thunder go fire you, your generation and asiwaju.
Shay you no fit buy fuel before, now make we see as you wn take buy light.

gabbytabby:
Control that which you can control. You really are not helpless.

Only use low energy 5watt or not more than 10 watt bulbs.

When you buy fridges and /or freezer check for low energy usage or those with inverter. Same for AC. Be intentional about everything you do and you will see that things are manageable.

There is a lot of wastage in the use of electricity.

Poor man, you will continue to manage your poor self.
People wer no wn progress.

marlow1962:
Tinubu is working.
God bless asiwaju

Na thunder go fire you, your generation and asiwaju.
Shay you no fit buy fuel before, now make we see as you wn take buy light.

😂😂

SpecialAdviser:
Hehehehe. I give Nigerians 6 months to understand the mess they are IN

Didn't this admin understand the full implications of removing subsidy or maybe they just didn't care.

gabbytabby:
Control that which you can control. You really are not helpless.

Only use low energy 5watt or not more than 10 watt bulbs.

When you buy fridges and /or freezer check for low energy usage or those with inverter. Same for AC. Be intentional about everything you do and you will see that things are manageable.

There is a lot of wastage in the use of electricity.

No matter how much you manage your consumption, you will still pay more when the tariff is increased.

Not necessarily never say never is my policy.

In my case I was paying about 2k then 1k a month on average by the time I made all my adjustments so that when I finally moved to Solar inverter I had continuous light and fan 24/7 and appliances and fridges/freezers 8am to 8pm.

jmoore:

No matter how much you manage your consumption, you will still pay more when the tariff is increased.

gabbytabby:
Control that which you can control. You really are not helpless.

Only use low energy 5watt or not more than 10 watt bulbs.

When you buy fridges and /or freezer check for low energy usage or those with inverter. Same for AC. Be intentional about everything you do and you will see that things are manageable.

There is a lot of wastage in the use of electricity.

Did u read the article. Even if u manage well, u will still pay more due to tariff increase. And who told u there is wastage in electricity. So 6hrs or at best 10hrs some days is wat is causing waste

People wey vote Tinubu go hear am.

First, fuel subsidy removal without palliative, then student loan scam, then removal of university tuition fees, then devaluation of fx rate. I just feel for the millions of Nigerians that this drug baron forced himself on by rigging the election. One week was even too short to prove what we have been saying all this while - Tinubu has nothing to offer.

Meanwhile, what happened to the 800 million dollars fuel subsidy palliative that Buhari got before he left?

How you want us to pay for something that is not available is what is still giving me headache.

You cannot provide it,yet the little wey dey ground you want to do an increase. Why don't you fix that first and make the increase? People will pay joyfully.

I keep on referring to the telecommunications industry. The infrastructure was on ground. People paid through their noses to get a GSM line because they wanted to talk and they were able to talk not that after spending a fortune to get a line they still couldn't talk.

No,It was easy to talk because it wasn't a case of putting the cart before the horse.

We told you the Tinubu administration will be that of tears and sorrow economically for Nigerians,some people say I should not say otherwise. By the time he is done taxing Nigerians you won't even be able to have an erection because cost of things would have even spoilt your erection

Shey eni ori yin o pe ni

Eyin osinwin eniyan radarada

gabbytabby:
Not necessarily never say never is my policy.

In my case I was paying about 2k then 1k a month on average by the time I made all my adjustments so that when I finally moved to Solar inverter I had continuous light and fan 24/7 and appliances and fridges/freezers 8am to 8pm.

If you are spending 1,000 naira when 1kwh is 66 naira, how much would you spend when 1kwh is 86 naira?

When we're still having trouble with the previous tariffs that the previous administration implemented, a new electricity tariff is introduced?
God, please, show us mercy.

November1857:
😂😂

Shay him say let the poor breath?
Okay na the poor go see breath, breath Taya.