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Electricity consumers in the country may have to adjust their budgets, as tariffs in the country go could up anytime soon. An official of the Nigerian Electricity Regulatory Commission (NERC) Aisha Mahmud disclosed this at an event in Abuja. The commission had submitted a revised template to the Federal Government, and as currently waiting for approval to implement it.

We have done the review and it is the Federal Government that is to decide on whether to implement the N51 price for a kilowatt-hour or not, as against the N31/KWH that is being paid for the commodity presently. Once we get the approval from government, we will announce its implementation.

Why are the tariffs going up?

Electricity tariffs are determined by several factors including inflation rate and the foreign exchange rate. Majority of the equipment used in the power sector are imported. Inflation rates have virtually doubled since last year and the Naira dollar exchange rate has depreciated massively, since the last increase took place. Distribution companies (Discos) had long pushed for an increase in the tariffs as they were below current costs.

Implications of the likely increase

The increase in electricit tariffs will be of great benefit to the various operators in the power value chain. Distribution companies ( the direct beneficiaries of the increase) will have more revenue to offset their debt to generating companies that supply them power. Generating companies, on the other hand will be able to pay off debts to gas suppliers.

An increase in electricity tariffs would however lead to an increase in power costs for both individuals and businesses. This could lead to an increase in the price of goods and services (inflation).

Why government may suspend the increase

Approaching elections, mean the government may be unwilling to implement increase in tariffs, as that would create negative sentiments among the electorate.  The government could decide to suspend the increase, or allow a marginal increase.

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Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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