Nigerian Govt Announces Hike in Electricity Tariffs

Mr Oseni said the new rate will be imposed only on consumers, who represent 15 per cent of the population but consume 40 per cent of the nation's electricity.

The Nigerian Electricity Regulatory Commission (NERC) has ordered the immediate upward review of electricity tariffs from Wednesday, 3 April.

The NERC Vice Chairman, Musiliu Oseni, disclosed this while speaking at a press conference in Abuja on Wednesday.

Mr Oseni explained that only electricity customers in band A would be affected by the increase.

He noted that the increase would not affect bands B, C, D and E while noting that the number of customers previously on band A has been downgraded.

Band A customers are offered an average daily electricity supply of 20 hours.

He said the new rate will be imposed only on consumers who represent 15 per cent of the population but consume 40 per cent of the nation's electricity.

Accordingly, he said power distribution companies (DisCos) will be allowed to raise electricity prices to N225 ($0.15) per kilowatt-hour from N68.

"We currently have 800 feeders that are categorised as Band A feeders, but upon reviewing those feeders' performance, the commission has now reduced it to under 500. This means that 17 per cent now qualify as Band A feeders. Those are the feeders that are currently meeting the average 20 hours average.

"So we have just 17 per cent of the total feeders of the distribution companies now qualify as Band A feeders. That is, when you look at where those feeders are critically, it is estimated that under 15 per cent of customers are currently connected to those feeders. So based on that, feeders are not meeting the 24-hour supply and have been asked to be downgraded immediately, with strict compliance and strong enforcement action," he said.

He added that the commission now sets its review for that application by the distribution companies and has decided that only the 17 per cent feeders, that is, the 15 per cent customers, will be affected by any increase that the commission will approve for this distribution company.

"And in that order, the commission has approved a rate review of N225 per kilowatt hour for just under 15 per cent of the customer population. So that means less than 15 per cent of the customers will be affected. The commission has issued an order which is titled April Supplementary Order taking effect from today," Mr Oseni said.

NERC had in January said the Nigerian government will pay as much as N1.6 trillion to subsidise electricity in the year 2024.

Unveiling a new electricity tariff plan payable by electricity consumers in the country at the time, the Chairperson of the NERC, Sanusi Garba, said the order states appropriate tariffs that consumers should pay for investors to recover their operating costs.

Mr Garba explained that the order contains the federal government's policy on ensuring that due to the cost-of-living crisis, consumers will not be made to pay higher than the previous rates.

"The order seeks that prices charged by DisCos are fair to customers and are sufficient to allow DisCos to fully recover the efficient cost of operation, including a reasonable return on the capital invested in the business in accordance with section 116 of the Electricity Act 2023," Mr Garba said.

He added that the tariff order contains the appropriate tariff that DisCos should be charging if they are to remain in business while noting that the rates are very clear.

Constraints

In February, the Nigerian government said it had become very difficult to sustain subsidies on electricity in the country.

Nigeria's Minister of Power, Adebayo Adelabu, who disclosed this at a press conference, explained that the indebtedness of the country's power sector to electricity-generating companies (GenCos) and the gas companies (GasCos) had risen to over N3 trillion.

"Today, we are owing a total of N1.3 trillion to the power generating companies, out of which 60 per cent is owed to gas suppliers. Today we have a legacy debt, prior to 2014, to the gas companies of $1.3 billion; at today's rate, that is close to N2 trillion.

"Now, if you add N2 trillion legacy debt owed to gas companies and the N1.3 trillion being owed to GenCos, we have an inherited debt of over N3 trillion in this sector. How will the sector move forward? Nigerians deserve the right to know this," Mr Adelabu said at the time.

Speaking on electricity subsidy, he said countries like Ghana, Togo, and Benin Republic pay much more than Nigeria for electricity while noting that the government might not be able to continue funding electricity subsidies.

"What we have made provision for in the 2024 budget for subsidy is N450 billion and we will require N2.9 trillion for subsidy. So can we afford it? We must be realistic. Can we afford it?" he noted.

On Monday, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced the establishment of the 2024 Domestic Base Price (DBP) and applicable wholesale price of natural gas for the strategic sectors.

Announcing the establishment of the 2024 DBP, the agency in a letter signed by its Chief Executive, Farouk Ahmed, set the gas-to-power (Power sector) base price to $2.42 per Million British Thermal Unit (MMBTU) and $2.92 MMBTU for the commercial sector.

In recent years, the power sector has experienced many challenges ranging from electricity policy enforcement to regulatory uncertainty, gas supply, transmission system constraints, and significant power sector planning shortfalls.

In November 2013, the federal government privatised all generation and 11 distribution companies, with the federal government retaining 100 per cent ownership of the transmission company. This was to improve efficiency in the sector.

Despite years of public investment, the country has the lowest access to electricity globally, with about 92 million persons out of the country's 200 million population lacking access to power, according to the Energy Progress Report 2022 released by Tracking SDG 7.

Similarly, millions of households have yet to be metered, despite repeated assurances by regulators and industry players over the years.

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