Nigerian households are about to face tougher times as electricity prices are set to increase by more than 40 percent from July 1. This move aims to eliminate energy subsidies in the country and is part of President Bola Ahmed Tinubu’s efforts to reform the market.
Few weeks ago, the government removed subsidies on petrol (PMS) and a week later, allowed the naira to float freely in the foreign exchange market. These changes have made it difficult for the Nigerian Electricity Regulatory Commission (NERC) to determine the new electricity prices.
Currently, the average cost of electricity is N64 per kilowatt. However, with inflation rising and expected to reach 30 percent by the end of June, experts predict that the new average cost may jump to around N88 per kilowatt. This increase is necessary for the electricity sector to cover its expenses.
The power sector is also facing challenges in meeting the target of supplying at least 5,000 megawatts annually. Factors like the lack of meters, high gas prices, losses in the system, and the actual amount of electricity generated all contribute to determining the tariffs.
Nigerians are concerned that the upcoming tariff hike, combined with high unemployment and poverty rates, will lead to significant problems for households and small businesses. Energy costs alone could increase by over 70 percent, making it even harder for people to afford electricity.
Currently, the available electricity on the grid is about 3 GW from 17 power plants, which is about the same as the average power intake by distribution companies over the past four months. This gap shows that power companies are struggling to meet the demand.
Affordability is a major issue, as people are finding it difficult to pay for electricity, especially when the supply is unreliable. This has led many to seek alternative energy sources.
Experts are urging Nigerians to support the government’s efforts to stabilize the economy, even if it means accepting higher electricity prices. They believe these measures are necessary to reduce the country’s reliance on foreign exchange and promote a more efficient and accountable energy sector.
However, some experts have also criticized the current pricing structure, arguing that it should be based on market fundamentals rather than the exchange rate. They emphasize the need for fair competition in the energy market and increased investment in improving electricity infrastructure but what is quite certain is that the probability of the hike in electricity tariff and cost of living is high.