Nigeria’s Federal House of Representatives has rejected a possible increase in electricity tariffs.
The House took a stand against a proposed increase on Tuesday, July 20.
According to Channels Television, Honorable Aliyu Madaki moved the motion to reject the increase, which would create an additional cost burden on Nigerians who are already feeling the burden of the rise in food prices, transportation costs as well as an inflation rate of 22.79%.
Channels Television reports that the House of Representatives said that a yet-to-be-constituted power committee will establish a common ground with the Nigerian Electricity Regulatory Commission (NERC) to ensure that current economic circumstances are taken into consideration and the proposed electricity tariff hike is brought to a halt.
Backstory
Nairametrics had earlier reported that on July 14, NERC had announced that 11 distribution companies (DisCos) had applied for a review of electricity tariffs. A part of the NERC statement said:
- “Pursuant to Section 116 (1) and 2(a & b) of the Electricity Act 2023 and other extant rules, the eleven (11) successor electricity distribution companies (“DisCos”) have filed an application for rate review with the Nigerian Electricity Regulatory Commission (“NERC” or the “Commission”).
- “The request for rate review is premised on the need to incorporate changes in macroeconomic parameters and other factors affecting the quality of service, operations and sustainability of the companies.”
Prior to this time, a key power sector stakeholder had told Nairametrics that there would be a change in the way electricity tariffs are reviewed in the country, unlike the old method where NERC was fully responsible for deciding rates.
The new method would entail the following:
- DisCos will be responsible for reviewing and proposing their new rates to NERC.
- DisCos will then facilitate stakeholder consultations where they can present justifications for the proposed rates.
- Once approved, a new electricity tariff will be established.
The justification given for an increase in electricity tariffs
In June 2023, power sector experts had said that an increase in electricity tariffs would be inevitable as the power sector needed the upgrade to meet up with payments for gas supplies, as well as mandatory repairs which would keep the power sector value chain active and aid better delivery.
According to the experts, electricity tariffs in Nigeria are expected to rise following the unification of the naira which has led to the depreciation of the naira at the Investor and Exporter (I&E) window.
Also, they highlighted the fact that costs incurred by power sector entities (such as DisCos, Gencos etc.) include dollar elements, which must be recovered through end-user tariffs.
They also mentioned that FX unification will impact off-grid electricity users as well.
This is because they will experience higher costs for solar photovoltaic (PV) equipment, which is priced in dollars, leading to increased capital costs that must be recovered through off-grid tariffs.
It is not enough, because now the distribution had developed the habit of reducing power supply to the customers due expectations for thier request for increase in tariff, these almost a month now we don’t power supply for 6hrs a day and in every month from January they increase tariff now waiting for final bit to 100 naira /kw from 69.43 as proposed in thier request, the FG should intervene as a matter of urgency, Nigerians are been exploited in all sector of the nigeria economy.
Penny wise, pound foolish…
Most electricity distribution equipment are sourced externally in dollars. It therefore follows that the DISCOs cost would have automatically gone up following the effective devaluation of the Naira through the rate unification policy. Until DISCOs make enough money to cover costs, repay debts, make profit, and present a promising balance sheet to the banks of other lenders, they will never be able to invest in equipment upgrade (or even maintenance) to improve power supply.
You get what you pay for, and fo not get what you do not pay for.