The increase of over 130 percent in the price of diesel in seven months to N780 per litre has led to about 76 percent hike in power tariff across serviced residential estates in Nigerian cities.
This has added to rising costs for residential and commercial property occupiers, a new report has shown.
The report, compiled by Estate Intel, an online property research platform, highlights steps taken by operators in the residential real estate market to deal with diesel price hike.
Different estates operate different power consumption models, but what is common to them is the tariff-based system, which bills residents or occupiers according to their levels of consumption.
Frank Okosun, senior partner/CEO of Knight Frank Nigeria, had told BusinessDay in an interview that within the serviced estates being managed by them, they had been able to create a convenient system that made payment for energy consumed and other services less stressful.
“We have separated service charge from house rent to ease payments and to give tenants the opportunity to determine how and when they want power supplied to their apartments,” he said.
This means that those who can afford 24-hour power supply can get it while those that want just six hours get it, he said.
“But what we have seen mostly is that tenants now opt for reduced power supply in response to the economic realities that have seen many people struggling with rising costs,” Okosun added.
Dolapo Omidire, founder/CEO of Estate Intel, noted that there have been some changes in most estates.
He told BusinessDay that in March this year, they started documenting how residential occupiers and facility managers were responding to the high diesel price.
“With the help of Venco and Gatepass, property technology firms, we also tracked the movement in tariffs and energy policy changes in multiple residential communities within the country,” he said.
Omidire said that within the 22 estates surveyed in Yaba, Ikeja, Surulere, Victoria Island, Lekki Phase 1, Ikoyi, Osapa, Chevron and Ajah, they discovered that average power tariff grew by 76 percent from 90/KwH to 178/KwH between February and July.
According to him, because it was impossible to accurately estimate the amount of power to be supplied from the national grid, facility managers and landlords typically ask occupiers to pay a deposit based on expected consumption.
“This deposit will be drawn down based on metered usage or a simple split between all the occupiers. Rollovers or top-up requests will be made as required,” he said.
He said all the serviced estates and communities surveyed operate a tariff-based system, which involves a single energy cost that blends payments to the national grid and payment for internally generated energy, usually diesel.
“These tariffs, typically measured as naira per kilowatt-hour, allow a relatively simple way for occupiers to be billed on all their energy consumption,” he said.
Read also: How regional grids can fix Nigeria’s power woes
Within the period under review, he said, a three-bedroom apartment has seen its total energy expenses grow from N70,000 to N140,000 per month, adding that in the present high inflationary environment Nigerians find themselves where incomes are yet to rise, things are getting too hard for the average Nigerian.
In his reaction to the tariff price increases, Nahel Jarmakani, managing director of Green Key Facility Management, said before the price hike, anyone who had surveyed the market would find out that tariffs ranged from N70 per kWh to as high as N95 per kWh.
“GreenKey was on the lower end and had posted N72-N78 across all estates we manage. Having an attractive rate was a key competitive advantage for us and helped to keep our customer retention high. When the crises hit, these rates were unattainable and a sharp increase was expected,” he said.
He pointed out, however, that what was not expected was how sharp it would be as some estates started to charge as high as N320 per kWh which explains why many community managers started to scrutinise how these tariffs were being calculated. “Any facility manager without a good and transparent system was in trouble,” he said.
Besides the adjustment to power tariff increase, residential market is also responding to management efficiency of facilities managers. Estate occupiers are now mindful and sceptical of how their money is used.
“For us, the diesel price increase exposed the inefficiencies of our facility manager and the facility management process. Prior to a recent change, we weren’t given an account of how the service charge was being spent; so it was difficult to know if we had surpluses or deficiencies,” an estate occupier who did not want to be named said.
Continuing, the occupier said when diesel prices went up and the facility manager asked for more money, tenants were reluctant to pay, “not because we weren’t aware of the increases, but because we were sceptical of how the funds were being managed.”
“Even though our old facility manager was replaced, the new person also doesn’t have the ability to do much. My household has decided to leave and we also know some other tenants that are making similar arrangements,” he added.
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