The Nigeria Labour Congress, Trade Union Congress, and Organised Private Sector, on Wednesday, faulted the latest hike in the electricity tariff payable by customers in the Band A Category.
Following the depreciation of the naira against the US dollar, and inflation, among other factors, the Nigerian Electricity Regulatory Commission again raised the tariff payable by Band A customers.
On Wednesday, some distribution companies including Ibadan Electricity Distribution Company, Eko Electricity Distribution Company, and Kaduna Electricity Distribution Company, among others, announced an upward review of their tariffs for Band A from N206.80 per kilowatt-hour to N209.50/kWh.
Though the increase appears marginal, organised labour, private sector operators and consumers kicked against it.
They wondered why the power sector regulator would approve a tariff hike despite calls for the reversal of the previous tariff hike.
In a statement, the acting General Manager of the Ibadan Electricity Distribution Company, Francis Agoha, said the review was duly approved by NERC as captured in the multi-year tariff supplementary order.
Agoha said the adjustment was necessitated by several key economic indices, including fluctuations in the exchange rate, the current inflation rate, available generation capacity, and the cost of gas.
“These factors have significantly impacted operational costs, and the new tariff will mitigate these financial pressures while continuing to deliver high-quality electricity services,” Agoha disclosed.
He said the adjustment affects only our Band A customers, adding that “the tariffs for Bands B, C, D, and E remain unchanged.”
The IBEDC boss acknowledged that the rise in tariffs could be a concern for customers, however, he said the increase was necessary.
“We understand that any change in tariffs can be a concern for our customers, and we assure you that this adjustment is necessary to maintain and improve the quality of our services. Our goal is to ensure that you receive the best possible value for your money,” he stated.
The tariff hike is coming amid complaints from customers, including manufacturers as well as public and private institutions that their monthly electricity bills are becoming grossly unaffordable.
Also, Kaduna Disco, in a statement titled, ‘Upward Review of Tariff for Band A Feeders’, disclosed that the new tariff became effective on July 1.
“Dear esteemed customers, the management of Kaduna Electric informs the public of an upward review in the tariff of Band A feeders from N206.80/kWh to N209.5/kWh.
“The review is effective from July 1, 2024, and affects both prepaid and postpaid customers.
“Kaduna Electric assures customers on its Band A feeders of the continued availability of 20-24hrs supply daily as stipulated in the Service Based Tariff regime,” the statement read.
It clarified, “The public should please note that the tariff for Bands B, C, D, and E remains unchanged.”
It was gathered that the hike in tariff had to do with the rise in monthly electricity subsidies from N102.30bn in May to N158.53bn in June.
The increase in electricity subsidies was a result of the rise of the dollar against the naira and the accelerating inflation in the country.
In April, the NERC raised Band A tariffs to N225 per kilowatt-hour from N68. At that time, one dollar was trading at N1,463, according to the commission.
In documents released by the NERC in June, the total subsidies for April stood at N140bn and inflation was 31.7 per cent.
In May, the commission reduced the Band A tariff to N206.80/KWh when the dollar was N1,227.8 and the inflation rate had soared to 33.2 per cent.
It was observed that the tariff shortfall, otherwise known as subsidy, was N102.3bn in May.
However, there was a rise in the subsidy claim from the previous N102.3bn to N158.5bn in June.
The NERC data showed that a dollar traded for N1,470 while the inflation rate rose to 34 per cent in June, impacting operational costs, including the cost of power generation, transmission and distribution.
For example, in Abuja Electricity Distribution Company, the commission said the energy delivered was 611 megawatt-hours per hour in April. The same was delivered in May and June.
While the generation cost was N103.9 per kilowatt-hour in April, it dropped to N87.33/KWh in May and rose to N104.45/KWh in July.
The AEDC had a transmission and admin cost of N9.1/kWh in April, N8.9/kWh in May and N9.8/kWh in June.
It was gathered from the NERC data that the end-user cost-reflective tariff in AEDC was N180.2/kWh in April; N156.9/kWh in May and N181.7/kWh in June.
Similarly, the end-user allowed tariff was N123.51/kWh, N116.23/kWh and N116.23/kWh in April, May and June, respectively, indicating that despite the rise in the cost of power production, the NERC pegged the allowed tariffs at the same rate in May and June.
With that, the Federal Government would pay an additional N56bn as electricity subsidy in June, compared to what it would pay in May.
As a result, the Ministry of Power resorted to an upward review of the current Band A tariff.
When the commission reduced the Band A tariff to N206/KWh in May, its spokesperson, Usman Arabi, told one of our correspondents that the reduction was due to the naira appreciation in the foreign exchange market.
It was gathered that the government was reluctant to return to the initial N225/kWh, considering the mass protest that greeted the removal of subsidy for premium electricity consumers.
Industries kick
The National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said the move was going to cause an additional shutdown of industries.
“We do not need any further increase now. Any increase in inputs would translate to an increase in cost. We are already experiencing an increase in cost, which means we are facing an increase in the cost of manufacturing. This is unsustainable.
“The constant increase in cost will lead to a decrease in demand for locally made goods, making them less competitive with imported goods from China. This will result in a decrease in profit, potentially leading to a shortage of industries. If industries are unable to sell their products, they may resort to reducing salaries or laying off workers, which could lead to an increase in crime.
“With inflation at over 30 per cent and interest on bank loans at a high per cent, we should be exploring ways to subsidise locally made goods to make them more competitive. Instead, we are increasing costs, making it harder for industries to survive. This is frustrating, especially when we see other countries like the Republic offering power at a lower cost.”
Kuti-George said the power sector should be unbundled to allow competition, similar to the telecoms sector, to drive down cost and improve service quality.
He added, “The issue boils down to monopoly. If we unbundle the power sector and allow anyone to generate and sell power, we won’t be having this conversation. We’ve seen the impact of competition in the telecoms sector, where SIM cards have gone from N56,000 to being free. We need to apply the same principle to the power sector to make it more competitive.”
The National President, Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said the increase in electricity tariff would negatively affect the private sector.
He said, “Many organisations are already struggling to stay afloat, and this hike will push them over the edge. Universities are warning of impending bankruptcy, and businesses will be forced to close shop.
“This will lead to higher inflation as companies pass on the increased costs to consumers, resulting in higher prices for goods and commodities. Businesses that can’t absorb the costs will shut down, leading to job losses and a decline in economic activity. This will have a ripple effect on the entire economy, reducing government tax revenues and exacerbating social issues.
“We urge the government to reconsider this decision, as it will only serve to stifle the economy and worsen inflation. We need policies that support economic growth, not those that strangle it. The private sector is already struggling, and this increase will be the final nail in the coffin for many businesses.”
The Director-General, Lagos Chamber Of Commerce and Industry, Dr Chinyere Almona, had earlier called for a reduction in inflation and rate hikes.
She said, “As inflation continues to rise despite the various interventions by monetary and fiscal authorities, we must take more decisive and multifaceted action to stabilise prices and support our citizens’ purchasing power.
“With several hikes in the past months, we are yet to record a significant impact on stabilising prices. The twin burden of high inflation and interest rates is overheating the economy and causing increased volatility and uncertainty.
“The private sector is once again thrown into more profound loan repayment crises as interest rates adjust to the new monetary policy rates. We are likely to see a reduction in demand as purchasing power weakens and this may lead to lower industrial production and loss of jobs eventually.”
A member of the Nigerian Economic Summit Group, Faith Iyoha, said the best route was for the private sector to depend on alternative power supply.
The Executive Director, Electricity Consumer Protection Centre, Princewill Okorie, condemned the hike in tariff.
“We need to ask the legislators what they are doing. There was a public hearing on this tariff increase. Is it that the legislators don’t have any authority anymore? Why did the NERC go ahead to increase tariffs despite all we have done? That means nobody calls them to order. Are they above the law? The legislators were elected by the consumers who are the electorates. It is expected they protect their interest. I was at the public hearing and I made presentations there.
“If the consumers take to the street, police will take out their guns, but now that the rights of the consumers are being violated and they are treated like slaves, what is the police saying? What are the Leaderships of the National Assembly doing? NERC is violating the laws by the legislators that put them in place.
“Who else will deliver Nigerians? It is like the legislature does not have power anymore. Why did they spend more to conduct the public hearing on the tariff increase when they knew there would be no result? The Manufacturers Association of Nigeria took Discos to court. What is the verdict? Who do the people respect?” Okorie queried.
An expert in the electricity industry, Bode Fadipe, said the government should not have considered a tariff hike this time.
Fadipe urged the government to be sensitive to the economic realities of the moment, saying that people’s income had reduced drastically.
He noted that contemplating a tariff hike currently may be too simplistic.
“I don’t think a tariff adjustment is necessary to follow. The government has to be sensitive to the economic reality of the moment.
“Disposable income has reduced greatly. To contemplate tariff adjustment may be too simplistic,” he told The PUNCH.
The Federal Government recently stated that about 85 per cent of Nigerians still enjoyed the electricity subsidy in the country, despite the over N1tn that would be saved from the fresh tariff hike.
It stated this in response to the continued reactions from Nigerians over the recent increase in electricity tariff.
The regulator said the new tariff signified a removal of electricity subsidy for Band A consumers, who constituted about 15 per cent of the total number of power users across the country. (PUNCH)
