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FG under fire over electricity tariff hike

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…as anxiety mounts on plan for general increase

Nigerians are lamenting bitterly, with individuals and groups condemning in strong terms the recent increase in electricity tariff by the Federal Government, saying it would exacerbate the current economic plight of the masses. To worsen matter for the people, the plan for a general tariff hike across all the Bands is causing most people, who are already under heavy economic burden, fear that the increase will further impoverish them.

This is even as the Nigeria Labour Congress (NLC), has told the Federal Government to rescind the decision or prepare for the consequences of the tariff hike, which it described as wicked and unpopular.

Following the increase in the price of gas used by electricity Generation Companies (GenCos), the Federal Government, through the Nigerian Electricity Regulatory Commission (NERC), had on Tuesday approved an increase of 240 percent in electricity tariff for customers under the Band A classification, pushing their tariff from N68 per kilowatt hour to N225/kWh.

Band A customers are those that receive an average daily electricity supply of 20 hours or more. With the new order issued by NERC, Band A would no longer enjoy Federal Government subsidy on electricity.

Business Hallmark’s checks revealed that the tariff hike was aimed at making a significant cut on estimated N2.9 trillion electricity subsidy in the 2024 fiscal year.

It was further learnt that the hike became inevitable following cash-flow constraints arising from FG’s inability to pay obligations to the Nigeria Electricity Market.

President Bola Tinubu had, since July 1, 2023, frozen electricity tariff at December 2022 level with a promise to pay the difference as subsidies. But the government has so far failed to pay any amount to the bulk market, leading to the accumulation of N3.5 trillion debts to power generation companies and gas suppliers.

The Vice Chairman, NERC, Mr. Musliu Oseni, told journalists in Abuja on Wednesday that in order to ensure that only customers, who receive, at least, 20 hours of electricity daily are on Band A, the number of feeders that meet the threshold had been reduced from 875 to less than 500.

He explained that only 15 percent of the 13,162,572 electricity customers nationwide would be affected by the tariff increase while the remaining customers would continue to pay the old rate until supply improved and they are migrated to the new Band A.

NERC expressed hope that the additional revenue would attract investments into the sector, adding that it would deploy several tools to ensure that customers in Band A would get the daily hours of supply from electricity distribution companies (DisCos).

He stated that the cost of electricity has gone up significantly since the Multi-Year Tariff Order 2024 effect on January 1, stressing that the decision by the government to increase the price of gas from $2.18/MMBTU to $2.42/MMBTU and the rise in foreign exchange rate were major factor in the review.

He noted that because the tariff payable by customers remained the same despite these changes, the performance of the generation companies was affected because they could not pay for gas.

Tariff chart

However, two days after the tariff hike, the Federal Government hinted that a similar measure would be extended to other categories of consumers, as the recent increase in electricity tariff is a pilot in phasing out of electricity subsidy in the country.

Speaking at a briefing in Abuja on Friday, Minister of Power, Adebayo Adelabu, said the government plans to remove all subsidies to allow the thriving of investment in the power sector.

The Minister said: “This tariff review is in conformity with our policy thrust of maintaining a subsidized pricing regime in the short run or the short term with a transition plan to achieve a full cost reflective tariff for over a period of, let us say, three years.

“I have mentioned it in a couple of media briefings that it is because of government sensitivity to the pains of our people that we will not make us migrate fully into a cost reflective tariff or to remove subsidy 100 percent in the power sector like it was done in oil and gas sector.”

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No gain in sight

But economic analysts and other stakeholders are yet to see justification for increase in tariff in the face of eroding purchasing power of households, spiraling operating costs for businesses among other debilitating effects of fuel subsidy removal and naira devaluation.

The Head of Information, NLC, Benson Upah, in a statement seen by our correspondent said, “We did say earlier that this tariff hike is insensitive and unpopular. So, if the government elects to continue with the hike or persists in something that is evil, I’m sure it is equally prepared for the consequences of that evil.

“The manufacturers are saying this is going to hurt businesses and make the environment more hostile, and we also said so. There is no place in the world, where high power tariffs have supported manufacturing. Not even in the developed world.”

Also, Chairman of the South-South United Action for Democracy and the Rivers State Civil Society Organisations, Georgewill Enefaa criticised the electricity tariff increase, saying it was bad for the government to allow the increase in electricity tariff amid the economic situation of the country.

He said, “This present administration represents capitalism, which is only interested in profits. By its design, it is not interested in the welfare of the people, just profits.

“It is quite pathetic and it is a height of insensitivity to the government that cannot provide other sources of energy like petroleum.

“This is a time when production is dropping in the country and they decided to increase the price of one of the significant means of production, which is electricity. It is wickedness, to say the least, and barbaric. The easiest explanation is that this administration is interested in tapping the last straw of blood from the veins of Nigerians.”

Similarly, the Northern Elders Forum (NEF) has kicked against the increase in electricity tariff, describing it as a reckless move and a complete disregard for the well-being and welfare of the Nigerian people.

A statement by the forum read in part, “Under the new tariff plan, 24 hours of electricity per day will cost a staggering N5,400, amounting to an unbearable monthly total of N162,000 and an astounding yearly total of N1,971,000.

“These exorbitant amounts are simply unaffordable for the majority of Nigerians, who are already grappling with economic hardship and trying to make ends meet.

‘’By implementing such exorbitant electricity tariffs, the government is effectively perpetuating a form of economic oppression that will only serve to widen the gap between the rich and the poor in Nigeria. It is imperative that this act of exploitation be firmly rejected and not be allowed to stand unchallenged.

“The decision to implement these tariffs without considering the impact on the average citizen is not only callous but also short-sighted. The resulting consequences could potentially lead to internal security threats as the disparity between the haves and the have-nots becomes more pronounced.”

In his reaction, Communications & Economy expert, Clifford Egbomeade, said: “The recent decision by the government to increase electricity tariffs by approximately 230% carries significant economic implications for both businesses and consumers alike. One immediate effect is the rise in operating costs for businesses, particularly, those with high energy consumption, such as manufacturing industries.

“This could lead to reduced profitability and potential layoffs as businesses seek to offset the increased expenses. Moreover, higher production costs may ultimately be passed on to consumers in the form of higher prices for goods and services, thereby, impacting consumer purchasing power and potentially contributing to inflationary pressures in the economy.”

Lawmakers to the rescue

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In a statement issued in Abuja on Friday, the Minority Leader of the House of Reps, Kingsley Chinda, described the hike as inhuman and evil for placing an unbearable burden on the already strained populace, thereby exacerbating economic hardships and widening the chasm of inequality.

The statement read in part, “We urge Mr. President, Bola Tinubu to prevail on the electricity regulator, NERC, to rescind this decision and prioritise the welfare of the people.

“Transparent dialogue and inclusive decision-making processes are imperative to address the root causes of the energy sector’s inefficiencies and ensure sustainable solutions that benefit all stakeholders and not consistent and persistent increase in tariff.

“We call for increased accountability and transparency in the management of resources within the electricity sector. Citizens have the right to demand efficient service delivery and fair pricing mechanisms that align with their economic realities.”

The Senate had earlier on Thursday pledged to take an action that would favour Nigerians, when it resumes plenary on April 16. The Chairman, Senate Committee on Media and Public Affairs, Yemi Adaramodu, gave the assurance while speaking with journalists in Abuja.

The Upper Chamber had earlier rejected the pronouncement by the Ministry of Power to approve the proposed hike in electricity tariff by distribution companies. The Senate also rejected plans to remove electricity subsidy given the present hardships in the country.

The Senate consequently directed its Committee on Power to investigate the N2 trillion required for electricity subsidy payment, other debts owed in the sector and the state of metering in the country.

No room for violation

Meanwhile, the NERC has directed DisCos to refund all over-billed Band B customers by April 11. This directive to the DisCos on implementation of the April 2024 supplementary Multi-Year Tariff Order was released on Saturday.

The directive came amid complaints from customers not on Band A, who are now being made to pay N225/KWh for electricity.

It directed that “All DisCos shall ensure that only the newly approved Band A feeders listed in their April 2024 supplementary orders are maintained as Band A for the purpose of vending to prepaid customers and billing for postpaid customers on their networks”.

The DisCos were also required to immediately post on their websites, the schedule of approved Band A feeders that have been affected by the rate review.

“All DisCos shall set up a portal by April 10, 2024 on their website that allows all customers to check their current bands by entering their meter or account numbers.

“All customers wrongly billed at the new rate should be refunded through energy tokens not later than Thursday, April 11, 2024, and file evidence of compliance with the commission by April 12, 2024,” the NERC ordered.

NERC had on Friday slammed a N200m fine on the Abuja Electricity Distribution Company Plc for violating its Supplementary Order on the April 2024 Multi-Year Tariff Order.

The firm was said to have, within two days of the tariff hike, applied the new rate of N225/kWh to all consumer bands under its franchise areas, contrary to the directive that only those on band A should pay the new rate.

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At 206.5 trillion cubic feet, Nigeria’s natural gas reserves are among the largest in the world, as the country owns 33 percent of Africa’s total natural gas reserves.

While Nigeria grapples with generating 12,000MW and transmits 4,000MW-4,400MW, its counterparts, South Africa and Egypt are on 58,095MW and 59,063MW respectively, having constantly explored a diversified mix of energy resources.

 

 

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