Following the federal government’s decision to implement a 240% electricity tariff hike for Band ‘A’ customers, households are bracing themselves for tougher economic conditions, prompting calls for a reversal of the policy.

    The Nigerian Electricity Regulatory Commission (NERC) recently approved the increase in electricity tariff for Band A customers, raising it from approximately N66 to N225 per kilowatt hour for various distribution companies (DisCos) nationwide. This significant hike represents a considerable financial burden for consumers.

    Electricity Tariff Hike

    Musliu Oseni, the Vice Chairman of NERC, clarified that the tariff adjustment would primarily impact customers who receive 20 hours or more of electricity supply daily. However, the announcement has sparked concerns among consumers who fear the implications for their household budgets.

    Meanwhile, Minister of Power, Dr. Adebayo Adelabu, revealed that the federal government anticipates spending about N2.9 trillion on electricity subsidy in 2024. Despite the tariff increase for Band A customers, the government continues to subsidize a substantial portion of electricity supply, accounting for 85% of the cost.

    Dr. Adelabu reiterated the government’s commitment to supporting low-income consumers, emphasizing that it subsidizes approximately 67% of the expenses associated with electricity production, transmission, and distribution across Nigeria.

    During the Fourth Ministerial Briefing in Abuja, Minister of Power, Dr. Adebayo Adelabu, reiterated the government’s stance on subsidy withdrawal in the electricity sector. Speaking alongside the Minister of Information and National Orientation, Mr. Mohammed Idris, Adelabu emphasized that the government is committed to alleviating the suffering of its citizens.

    He highlighted that, despite the introduction of tariff increases, the government still subsidizes a significant portion of electricity production, transmission, and distribution costs, amounting to approximately 67%. This subsidy translates to an estimated N2.9 trillion for the year 2024 alone, accounting for over 10% of the national budget.

    Adelabu acknowledged the competing demands on government revenue from various sectors, including works, housing, education, health, and defense. He stressed the need for realism and consideration in policymaking, emphasizing that it would be insensitive to burden the government with continued heavy subsidies, particularly in the power sector.

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    Hike in Electricity Tariffs

    In light of these challenges, Adelabu urged stakeholders to adopt a pragmatic approach, balancing the need for subsidy reduction with the imperative of addressing the broader socio-economic needs of the country.

    Adelabu emphasized that the tariff increase primarily affects only 15% of electricity customers categorized under Band A. He pointed out that the tariff review has been beneficial to approximately 85% of electricity consumers across the country.

    He reiterated that the policy aims to be pro-poor, ensuring that the burden of electricity costs is more evenly distributed. Adelabu clarified that the wealthy, who consume more electricity, benefit more from subsidies, and it is essential to adjust tariffs accordingly to promote fairness and affordability for all consumers.

    While acknowledging the transition towards a fully cost-reflective tariff, Adelabu reassured that the government remains committed to protecting the interests of the poor.

    Dr. Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise (CPPE), expressed concern over the substantial increase in tariffs, particularly for customers in the Band A category. He noted that such a significant hike could pose a significant burden to citizens, urging for careful consideration of its impact on consumers.

    Yusuf expressed that the categorization of electricity consumers isn’t a matter of preference but rather a necessary classification. He acknowledged that for those capable of affording it, the tariff increase could bring relief by eliminating the need for diesel purchases, generator maintenance, and the associated noise pollution. In some cases, it might even be more cost-effective than running a diesel generator.

    Highlighting the complexities within the power sector, Yusuf emphasized the pressing funding and liquidity challenges, which pose significant risks to investments across the electricity value chain.

    Nigerian Households Face Financial Strain

    Adebayo Adeleke, the group executive chairman of Lancelot Group, voiced concerns about the lack of synergy among government arms, particularly between executive bodies and regulatory agencies. He criticized the disjointed approach where one government arm announces tariff increments while another discusses potential sanctions, indicating a lack of coordination and coherence in policy implementation.

    Adeleke noted that such discrepancies signal inadequately conceived policies and a failure to engage critical stakeholders effectively. He stressed the importance of inclusive policy formulation and stakeholder engagement to prevent conflicting directives within the government.

    The recent significant increase in electricity tariffs for Band A customers, which came into effect on April 3, 2024, has left many households and businesses grappling with its impact. Among those affected is Mrs. Edith Ologeh, a fashion designer supporting her family amidst challenging economic conditions worsened by the removal of petrol subsidies and the escalating cost of living due to exchange rate fluctuations.

    Ologeh, whose business relies on stable and affordable electricity, was devastated upon learning about the tariff adjustment, especially since her area falls under Band A classification. Operating her fashion design shop from a part of her apartment due to the high cost of renting a separate space, she fears that the increased bills will cripple her business unless reversed.

    NERC 1

    Chukwuma Uzoma, who runs an eatery and drinking bar in Onigbongbo village, shares similar concerns. He relies on electricity to chill his drinks and attract customers, but the tariff hike has left him contemplating shutting down, unsure of how it will impact his family’s livelihood.

    Silvanus Okpara, echoing the sentiments of many small and medium enterprises (SMEs), highlights the adverse effects of tariff increases on operational costs and competitiveness. He urges the government to consider the disproportionate impact on vulnerable populations and criticized the rushed implementation of policies.

    Adeniyi Julius, a project manager, emphasizes the strain the increment will place on low-income families already struggling to make ends meet. He warns of potential consequences on quality of life and productivity if electricity bills become unmanageable.

    Blessing Oladipo and Ola Michael, residents of Lagos and Ogun States, respectively, express discontent with the tariff hike, citing inconsistent power supply and the current economic climate as reasons for their opposition. They question the rationale behind increasing tariffs when electricity availability remains inadequate.

    These sentiments reflect the widespread concerns among electricity consumers facing the dilemma of whether to endure the higher costs or risk the survival of their businesses and households.

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