LEADERSHIP Friday reports that the slight electricity tariff adjustment in September points to the confirmation of plans by the federal government to withdraw its subsidy payment in the sector.
A discreet investigation by LEADERSHIP uncovered a clandestine tariff adjustment which key industry sources say was effected to gauge reactions from the public.
Though inquiry sent to Usman Arabi, spokesman of the Nigerian Electricity Regulatory Commission (NERC) to confirm the development was not responded to, LEADERSHIP Friday’s findings show that a 2 per cent hike was effected in September.
Our source said the adjustment became inevitable as government can no longer sustain the subsidy payment.
“The hike is infinitesimal because it was not intended to draw any attention, and it is deliberate and would continue at that level so as not to choke consumers, but it will certainly be a periodic review,” our source said.
Government has claimed that its subsidy payments in the electricity sector is well over N30 billion monthly.
Vice President Yemi Osinbajo had, at the opening of the 14th Nigerian Association for Energy Economics (IAEE) Conference in Abuja, recently, said the government expected the electricity sector to generate its revenue from the power sector market.
Speaking through the special adviser to the president on infrastructure, Ahmed Zakari, he said, “The Federal Government intends to reduce its interventions in the power sector and thus allow the electricity market to run on its own, thereby allowing the market participants to determine the course of action.”
Going by what Osinbajo said, with such consideration to scrap electricity subsidy from next year, Nigerians would have to pay more for the commodity under a new tariff arrangement to be unveiled by the federal government.
Osinbajo noted that government would be investing over $3 billion in the coming years to improve transmission and distribution infrastructure across the country.
Another Electricity Tariff Hike?
He explained that the effort of President Muhammadu Buhari’s administration to reform the energy sector would ensure that it continues to play critical roles in the growth of the country’s social and economic wellbeing.
He said: “Electricity tariff reforms with service-based tariff has led to collections from the electricity sector by 63 per cent, increasing revenue assurance for gas producers and stabilising the value chain.
“It is anticipated that all electricity market revenues will be obtained from the market, with limited subsidy from next year as reforms in metering and efficiency with the DisCos (distribution companies) to improve.
“To accelerated investment in transmission and distribution, over $3 billion will be put into this sub-segment of the electricity value chain that will put us on the path to delivering 10 gigawatts through the interventions of the Central Bank of Nigeria/Siemens partnership, World Bank and Africa Development Bank, and others.”
The federal government and Labour had gone into extensive discussions prior to the implementation of the Service-based Tariff in November 2020, where the electricity regulator (NERC) had promised improvement in service delivery to Nigerians.
The highest peak generation of electricity for the month of September was 4,694 Megawatts (MW), including electricity exports, and what was available for Nigerians in-country came down to 3,863MW, a far cry from the 30,000MW demand for electricity in the country
Essentially the country is providing roughly 11 per cent of the citizens’ demand for electricity despite huge government interventions in the power sector.
At the recent NERC-stakeholders’ forum, concerns were raised about the power sector moving backwards rather than forging ahead going by the too many policy inconsistencies.
Nigeria has one of the poorest supplies of electricity despite the power sector contributing 78 per cent to GDP growth for Q2 2021.
Chairman of the Nigeria Electricity Consumers Advocacy Network (NECAN),Tomi Akingbogun, deplored the nature of the hike, describing it as fraudulent.
He said, “This is unfortunate and deceitful. No nation can develop based on deceit. Manufacturers need to capture their costs well to make profit so as to continue to produce.
“If costs are increased and hidden, the company will lose and close down, thereby increasing unemployment and reducing gross domestic product (GDP), etc.
“NERC needs to be run by people who understand the dynamics of the economy. NERC, at present, are not fair judges.”
Akingbogun, further said, “We all noticed this some months ago, the whole country cannot be deceived.”
Also, a vendor with one of the DisCos confirmed to our correspondent that an increase was actually made last month and that customers who patronise her observed the slight adjustment.
“I am aware and customers have been confronting me, but I have to let them know that there is a little adjustment following improvements in supply. That’s what I can tell you for now,” she said.
The Nigeria Labour Congress (NLC) has vowed to deploy the industrial mechanisms granted in labour laws for the defence of workers’ rights to resist increase in electricity tariff.
Equally, NLC President Ayuba Wabba had in July warned against a speculated plan to grant approval to DisCos to hike electricity tariff.
While the speculation was rife, Wabba said, “It is in the light of this that we dismiss the ongoing speculation on increase in electricity tariff as mere speculation.
“We, however, find it prudent to put you on notice should government make true the swirling speculation by approving an increase in electricity tariff, Organised Labour will be left with no option than to deploy the industrial mechanisms granted in our laws for the defence of workers’ rights.”
Wabba said that NLC had written to remind the minister that Organised Labour on September 28, 2020, through the Federal Government/Organised Labour Committee on electricity tariff, agreed to freeze further increases in tariff until it concludes its work and its report adopted by all the principals in the committee.
In his own reaction, convener of PowerUp Nigeria, Adetayo Adegbemle, said since privatisation, Nigeria has continuously bent over to the demands of the private operators without experiencing any notable improvement in the fortunes of Nigeria’s power sector, except the demands for tariff increase.
He lamented that despite all the several tariff increments, there has not been improvement in service delivery.
“The investors have not done well to keep to their end of the bargain, and the truth is that nobody trusts them enough to want to gamble on more time.
“There is no amount of money thrown at the power sector that will resolve the problems, as the power sector challenge is not a money problem,” he said.