Nigeria: How Buhari Hiked Electricity Tariff Three Times in 5 Years

By Simon Echewofun Sunday

The Nigerian Electricity Regulatory Commission (NERC) has confirmed that the electricity tariff has increased by two naira to four naira since January 1, 2021 to reflect increase in inflation and foreign exchange rates.

The new increase will be the 3rd time in 5 years under the administration of President Muhammadu Buhari.

According to a statement by the Assistant General Manager (AGM), Government, External and Industry Relations at NERC, Mr Michael Faloseyi, the Commission said although tariff increase for Bands D and E (Customers getting power below 12 hours daily) remain 'frozen', it however admitted that the tariff rates for even these classes of customers were 'adjusted' upwardly.

"In compliance with the provisions of the Electric Power Sector Reform Act (EPSRA) and the nation's tariff methodology for biannual minor review, the rates for service bands A,B,C,D and E have been adjusted by N2.00 to N4.00 per kilowatt hour (kWhr) to reflect the 'partial' impact of inflation and movement in foreign exchange rates."

"NERC also said "Any customer that has been impacted by any rate increases beyond the above provision of the tariff order should report to the Commission."

Varied increment

The latest tariff hike for the DisCos reflect varied increment percentage from 25 per cent above, records show. For instance, customers of Ibadan DisCo will pay an average of N46.5 per kWh from January to June 2021, rising from N34.1 as of December 2020, its order signed by NERC Chairman showed. The increase for this DisCo is N12.4 or 25 per cent.

According to a revised Multi Year Tariff Order (MYTO) signed by the new Chairman of NERC, Engr. Sanusi Garba, on December 30, 2020, and sighted Tuesday, the new tariff increase took effect on January 1, 2021, and supersedes the previous Order NERC/2028/2020.

In the new revised Service Based Tariff (SBT) Order NERC/225/2020, the commission said it considered the 14.9% inflation rate rise in November 2020, foreign exchange of N379.4/$1 as of December 29, 2020, available generation capacity, US inflation rate of 1.22% and the Capital Expenditure (CAPEX) of the power firms to raise the tariff.

This is effective till June 2021 while a Cost Reflective Tariff (CRT) expected to raise the new cost higher will be activated from June to December 2021, the NERC Order revealed.

Daily Trust had reported that in December, 2020, NERC notified that it had begun a review for another tariff amendment which has been completed and had taken effect from January 1, 2021.

How FG approved 3 tariffs in 5 years

Daily Trust reports that this is the third tariff increase NERC has approved for the 11 Distribution Companies (DisCos) in five years. It had increased the Multi Year Tariff Order (MYTO) 2015 by what customers described as over 50 per cent on February 1, 2016.

The MYTO template for reviewing tariff increase or decrease ought to be reviewed twice a year and the result implemented every six months.

Although indices like inflation, foreign exchange rates, gas prices went up with a lower generation capacity, prompting a further increase by June 2016, NERC failed to implement about at least nine tariffs on biannual basis, which piled up until 2020.

In the quest to gradually increase tariff by what it calls Cost Reflective Tariff (CRT), NERC planned a tariff hike of the Service Based Tariff (SBT) in April but postponed it to July due to COVID-19 pandemic.

It approved the hike for the DisCos starting September 2020, but suspended it after severe outrages; the Commission amended it with discounts and reintroduced it on November 1, 2020 which makes it the second tariff hike since 2016.

The new increase in January 2021 is the third of such in the last five years with a hike of about 25% on average varying across the DisCos.

NERC in the latest order planned another increase by June 2021 which will formally introduce a higher rate known as the CRT that it had targeted since 2020.

This article originally appeared on Daily Trust

Photo: Daily Trust