Nigeria’s Electricity Distribution Companies (DisCos) have informed the public of new electricity tariff rates taking effect from the first day of next month. In simpler terms, Nigerians will have to buy electricity from the Abuja Electricity Distribution Company (AEDC), the Eko Electricity Distribution Company (EKEDC) and others at a higher rate.
According to the Nigerian Electricity Regulatory Commission (NERC), this new development was directly brought on by the new unified FX rates. It means the present electricity tariff will rise by 40% — adding up to a 186% increase in just under a decade.
Between the fuel subsidy removal, the unification of the FX rates and the new electricity tariff, Nigerians will have to deviseWhat does the tariff hike mean for you?
To put things in perspective, the price of one unit of electricity will rise from around ₦60 per kWh to ₦100 per kWh. (Five years ago, one unit of electricity cost ₦46.) Instead of the usual 101 units for ₦6,000, starting Saturday, you’ll get approximately 60 units for the same amount. If you still require the same number of units, you would have to pay more. The other option is to reduce your consumption of electricity. new ways to survive the times.
Altogether, the hike will lead to larger electricity bills for anyone dependent on the DisCos for electrical power.
This development has led to some frustration. “₦10,000 used to give me exactly 203.1kWh,” Paul*, a consultant living in Lagos, told the Newsmen. “That lasted me 3 weeks, give or take. At the new ₦100/kWh rate, I have to pay around ₦20k. How is that fair? And I’m even one of the privileged ones.”
The NLC has labelled the increase “callous” and “insensitive”. Some Civil Society Organisations (CSOs) have expressed displeasure with the proposed increase.
A part of the problem is timing. “You can’t remove subsidy and increase electricity tariff at the same time,” Tosin Olaseinde of Money Africa tweeted. “I know there’s a need for an electricity tariff that’s reflective of real cost. Please, phase it.” She has a point.
Perhaps as mitigation, electricity users have been advised to purchase as many electricity units as they can before July 1.
What does the tariff hike mean for businesses?
The Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, has said that increased running costs, lower profit margins, and paralysis of manufacturing activities are the expected outcomes of the new tariff.
The same can be expected elsewhere, especially with small businesses. “I was still crying that I’m buying fuel for N520, and now they are saying electricity costs will increase,” said Chinwe*, a hair stylist based in Port Harcourt. “Next thing, our landlord will increase the rent. How will I make a profit? How are we going to survive all these things?”
Businesses unable to withstand the shock of an increased electricity tariff might need to be shuttered. Surviving businesses will have to adjust. This might mean closing earlier than usual to conserve purchased power units, transferring the new cost to customers via increased prices or making peace with reduced profit margins. Whatever model is chosen, an adjustment will be necessary.
What can be done?
According to Ajayi-Kadir, making sure 90% of electricity consumers are metered, plus constant electricity supply, will cushion the effects of the tariff hike.
In his words, the Nigerian government should come up with “electricity policies that will aid investment in the energy industry to increase generation capacities that will usher in large scale production of electricity and ensure effective implementation of the recent Electricity Act (2023).”
Some salvation might truly be found in the Electricity Act, which was signed into law weeks ago by President Tinubu. Its key features include de-monopolisation of the electricity sector, regulation and transparency of tariffs, strengthened regulatory bodies, and a focus on sustainability and renewable energy.
If these policies are implemented in a timely manner, things will improve for Nigerians and Nigerian businesses soon enough. The alternative will cripple several businesses.