While the recent electricity tariff increase only directly impacts Band-A customers, Nigerians across the board will likely feel the pinch.
Announced on April 3rd by the Nigerian Electricity Regulatory Commission (NERC), the new rates see a jump from N66/N77 per kilowatt-hour to a significant N225.
For many Nigerian households the Band-A electricity tariff hike translates into higher monthly expenses. With electricity being a fundamental necessity for daily living, the increased tariffs strain already tight budgets.
Read also: Electricity workers threaten strike over recent tariff hike
Basic amenities such as lighting, cooking, and refrigeration become more costly, posing a considerable burden on families, especially those with limited financial resources.
Businesses, both small and large, in band A areas are not immune to the impact of the tariff hike. Higher electricity costs directly affect operational expenses, ultimately leading to potential price hikes for goods and services.
The situation is further complicated by the high number of unmetered customers in Nigeria.
The National Bureau of Statistics reported over 5.8 million unmetered customers in Q4/2023. Without meters to track actual usage, these consumers may end up paying even more due to estimated billing based on the new, higher tariff.
BusinessDay’s findings showed as of February 2024, single-phase meters cost N82,000, while double-phase meters cost N259,000.
On Friday, Adebayo Adelabu, the minister of power disclosed the Federal Government’s plan to convert the entire power sector into a single band from the current six, in the next three years.
Speaking during a weekly briefing organised by the Ministry of Information in Abuja, the minister said the recent electricity tariff hike was the first step in government’s plan to completely remove subsidy payment.
According to Adelabu, the federal government has spent about N2.9 trillion on electricity subsidy, adding that the government was still subsidising 85 per cent of the electricity supply in the country despite an increase in tariff for Band A customers.
He said the government was not ready to aggravate the sufferings by refusing to adopt 100 per cent withdrawal of subsidy on electricity.
“This tariff review conforms with our policy thrust of maintaining a subsidised 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.
“It is because of government sensitivity to the pains of our people that will not make us migrate fully into a cost-reflective tariff or to remove subsidy 100 per cent in the power sector like it was done in oil and gas sector.
“We are not ready to aggravate the sufferings any longer which is why we said it must be a journey rather than a destination and the journey starts from now on, that we should do a gradual migration from the subsidy regime to a full cost-reflective regime and we must start with some customers.
“This is more like a pilot (scheme) for us at the Ministry of Power and our agencies. It is like a proof of concept that those that have the infrastructure sufficient enough to deliver stable power, those enjoying 20 hours of light should be the ones to get tariff added,” he pointed out.
Adelabu argued that anybody that goes into any business intends to first recover cost, then if possible, make some profit, explaining that the moment a business cannot cover costs, the sustainability of such business is doubtful and will be run aground.
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