According to indications, Nigerians may have to pay 40% more for electricity bills by the beginning of July 2023.
According to media reports, this comes around two weeks after President Bola Tinubu declared the end of the fuel subsidy regime at his inauguration.
This platform recognizes that the increase will eventually result in the elimination of all forms of energy subsidies in the country.
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According to The Guardian, with a monthly subsidy of around N50 billion continuing in the electrical industry due to revenue shortage, the July 1 pricing hike may be another litmus test for President Bola Ahmed Tinubu’s market reform.
The administration has already withdrawn PMS subsidies and floated the naira, complicating the price-setting of the Nigerian Electricity Regulatory Commission (NERC) 2022 Multi-Year Tariff Order (MYTO).
NERC’s current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97%, despite the fact that power sector operators have been unable to reach the criteria of supplying at least 5,000 megawatts per year after signing contracts with NERC.
While NERC’s projected tariff for July 2023 was expected to remove subsidy and increase the previously frozen tariff band D and E, increasing the bands from N54.59/kilowatt to N62.16 for band D and N48.37/kilowatt to N61.16 on average with an average increase across the bands moving to N67/kilowatt, the prevailing floating of the naira and spike in inflation is projected to move the new average tariff to about N88/kilowatt for the sector to recover the cost.
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However, an Ikeja Distribution source told our reporter that there has been no rise and that if there was, everyone would know about it.
Meanwhile, Adetayo Adegbemle, Executive Director of PowerUp Initiatives For Electricity Rights (PowerUp Nigeria), responded to the development, saying that while increasing tariffs appears normal given the current situation, there is a need to review the entire process and encourage basing electricity tariffs against the naira going forward.
“We have seen changes in the review yardstick before, and this could be an opportunity to review our tariff process,” he explained.
In response, Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of Economics at Babcock University, stated that there is still a mismatch between the cost of energy and the value exchange.
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He said “Nigerians are still struggling to keep pace with the cost of energy for business and household use. If the electricity tariff goes up as envisaged, the question remains if there will be value for the quantum of electricity so paid for.
“The truth remains that if electricity supply is constant, of the right quantity and quality, the envisaged upward review in the tariff will be gladly absorbed by the populace.”
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