The Nigerian government is brightening it’s chances of drawing from the World Bank’s intervention support of $750 million support on mass metering and network improvement for its ailing power sector, as it has maintained a steady track in pushing for a credible market reforms in the power sector with some bold steps.
Some of the bold steps includes bi-annual minor tariff review, considering exchange rate variables and inflation rates, as spelt out by the Electricity Power Sector Reform Act of 2005.
Already, the Nigerian Electricity Regulatory Commission, NERC has increased the electricity tariff from two naira to four naira since January 1,2021 to reflect increase in inflation and foreign exchange rates. This step it has failed to take since 2017,a move that has punctured investor interest in the sector prior to now.
“In compliance with the provisions of the Electricity Power Sector Reform Act (EPSRA) and 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. “The regulator informed in a statement issued on Tuesday.
Read also: Yuletide: Why traffic gridlock held travelers till dawn at Niger Bridge
BusinessDay findings confirmed that the World Bank and other development institutions had tied most of its intervention support to the a credible electricity market reforms.
Industry analysts say the increased push by the regulator to drive an investor friendly electricity market was positives from constant meeting from the World Bank, the Central Bank of Nigeria, the Nigerian Electricity Regulatory Commission, and other industry stakeholders in entrenching a credible electricity market.
“Most of the positives we’re seeing today is one of the demands of the World Bank in lending us support to drive a credible electricity market.I can confirm to you now that Nigeria has set a minimum threshold to draw World Bank’s facility support with the persistent market reforms being undertaken currently by the regulator-NERC.” Chuks Nwani, an Energy Lawyer and Power Sector governance expert told BusinessDay.
Nwani noted further that the reforms is strategic now and could lead to improved industrialisation of the economy as more companies would be willing to come into the economy, on the back of improved power and kick off of the African continental Free Trade Agreement.
Kunle Kola Olubiyo, President Nigerian Consumer Protection Network and member, National Technical Investigative Panel on Power System Collapses also noted that tariff increase is a regulatory function and investor friendly decision to grow the sector as well as make the electricity market whole.
He said: “The take aways from the service reflective tariffs/service based tariff is that it will increase cash flow, make the electricity market whole, increase the cash flow remittances to NERC as an institution that gets some percentages of market shares of remittance to the operators.
“It would further increase the share of remittances to TCN who get their share of the market through transmission service charges, transmission wheeling charges and will boost minimum remittances, and upscale the amount of money which the minimum threshold of remittances by the electricity distribution companies to the market operators and the Nigerian bulk electricity trading company.”Olubiyo said.
