On April 3, 2024, the Federal Government, acting through the Nigerian Electricity Regulatory Commission (NERC), implemented a significant increase in electricity tariffs, raising them from an average of N66/N77 per kilowatt hour to N225. Various factors, including the exchange rate N/$, transmission loss factor, generation cost, transmission and admin cost, wholesale gas to power prices, and benchmark gas transportation tariff, drove NERC’s decision.
This tariff hike has immediate implications for all Nigerians, transcending social and economic boundaries. Beyond affluent households, Band-A customers, predominantly comprising commercial establishments, will be directly impacted.
The ripple effect of increased operational costs for these businesses will inevitably lead to higher prices for goods and services. Consequently, consumers across all Band categories—A, B, C, D, or E—will bear these escalated costs, affecting their purchasing power and overall living expenses.
It is also crucial to highlight the adverse effects of this tariff increase on unmetered customers. Without meters to accurately measure their electricity usage, these customers risk bearing even higher costs due to the tariff hike.
The Q4/2023 Electricity Report from the National Bureau of Statistics (NBS) noted that there were 5,830,668 unmetered customers across the country, during the highlighted period.
The urgent need for unmetered customers to acquire meters is emphasized, albeit with the acknowledgment that meter costs have surged recently. As of February 2024, single-phase meters cost N82,000, while double-phase meters cost N259,000.
However, amidst these challenges, there are potential positive outcomes associated with the increased electricity tariffs. Distribution companies (DisCos) stand to gain improved access to finance, enabling them to modernize and enhance their infrastructure, ultimately leading to better service delivery.
Additionally, the tariff increase may incentivize DisCos to address metering gaps, particularly in areas characterized by high energy loss density. Some experts in the power sector suggest viewing the tariff hike as an opportunity to transition away from reliance on noisy and environmentally harmful diesel and fuel generators.
They argue that while electricity tariffs may increase, the long-term costs associated with fuel and diesel consumption, coupled with the inconveniences of generator usage, outweigh the immediate financial burden. For consumers on Band-A, the prospect of accessing on-grid power for up to 20 hours a day presents a more sustainable and cost-effective alternative compared to the ongoing expenses and environmental consequences of diesel and fuel usage.
In essence, while the electricity tariff increase poses challenges for consumers across Nigeria, it also serves as a catalyst for improvements in the power sector, potentially leading to more reliable and sustainable energy solutions in the long run.
Thanks as always Omono. My question is the legal side of this ,can a 300% increase be lawful ?
From what I understand, NERC is in a position to set tariffs based on market realities and this time, the Commission presented those realities (Forex, gas transportation tariff, etc.). So, yes, the 300% increment could be legal.