It was long in coming, but any committed observer of the Nigerian electricity supply industry knew it was only a matter of time before something would give in the country’s search for reliable power supply.
There was no doubt that the sector needed a tweaking, if not a complete overhaul. But the argument was which one should come first? Improved service by the operators in the value chain or increased tariffs to be paid by power consumers.
After years of going back and forth, the decision makers, including the federal government, the Nigerian Electricity Regulatory Commission (NERC) and indeed the Distribution Companies (Discos) on Tuesday finally hiked the unit price of electricity for a section of the country’s customers.
With a history of tariff postponements too numerous to detail because of its sensitive nature, being political, economic and social decision, the clamour for a cost-reflective tariff regime has been long-drawn.
Earlier in the year, NERC asked operators in the power sector, including electricity generation and distribution companies, to submit performance improvement plans (PIP) committing them to a higher quality of service.
The agency said the existing tariff regime would be retained, while the performance improvement plan would form the basis for future tariff review.
Although the regulator did not say when the new electricity tariff would be executed, it was apparently in preparation for last week’s increase.
Indeed, as part of the announcements and reversals, on December 31, 2019, NERC disclosed its plans to immediately review electricity tariffs in the country from January 1.
The order, titled “December 2019 MYTO Minor Review Order” for the 11 electricity distribution companies (DISCos), was jointly signed by the Chairman of the Commission, Prof. James Momoh, and the Commissioner for Legal, License & Compliance, Dr. Dafe Akpeneye.
But, the commission sometime later, said the new tariff regime would not take effect until April 1, 2020 to allow it sufficient time to consult all the interest groups following misgivings by many Nigerians.
By the time April 1, 2020 arrived, the coronavirus pandemic had happened, causing all kinds of shutdowns and lockdowns, leaving behind all kinds of uncertainties.
It was again postponed till July 1, which was another failed attempt at reviewing the tariffs after a meeting between the leadership of the National Assembly, NERC and Discos.
The lawmakers claimed that while the tariff increase was necessary, the timing was bad as Nigerians were still reeling from the negative impact of the COVID-19 pandemic.
At the time, Senate President, Ahmed Lawan, promised to meet with the president to thrash out the matter, during which it was agreed that the review should be deferred to the first quarter of next year.
Aside Lawan, who made the proposal for the postponement to the first quarter as the new take-off of the tariffs, Speaker, House of Representatives, Hon. Femi Gbajabiamila had also said that though well-intended, the timing was wrong.
If it took off at the time like it just did, it would mean that the federal government would no longer pay subsidy on electricity as it did with the liberalisation of the prices of petroleum products.
Before the hike, the tariff represented about 60 per cent of the actual cost-reflective tariff with the government making up for the shortfalls through subsidies to generation companies (Gencos) and gas suppliers.
But the Discos have always argued that most investors will not come into a market that is not cost-reflective and beleaguered by uncertainty.
Taking the Bull by the Horns
However, with the mounting pressure on government revenues and continuous push by international financial bodies like the World Bank and the International Monetary Fund (IMF) for Nigeria to end its subsidy regimes on all sectors, President Muhammadu Buhari, finally caved in and approved the review.
Regulator Explains Reasons for Hike
NERC stated that the said expected review was embarked upon, since customers did not object but demanded better quality of service during public hearings the commission said it held throughout the country.
It said that the commission took the decision after it reviewed the application filed by the Discos, taking into consideration the outcome of the public consultation held in February and March and thereafter approved new user tariffs from September.
“The order reflects the impact of changes in macroeconomic parameters and revenue requirements and a revised tariff design that aligns rates paid by customers with the quality of services as measured by average availability of power over a month period.
Excited Discos React to Tariff Review
For the 11 Discos, the news of the review was a big relief to a long-drawn battle to ensure that the chicken came before the egg, with the public insisting that service must improve first.
In explaining how it will work, Kaduna Electric Distribution Company (KEDC) in a statement by the Head, Corporate Communication, Abdulazeez Abdullahi, said the new tariff regime was not a blanket increase.
“Under the service based tariff, feeders from where customers receive power supply to their neighbourhoods have been categorised into Bands A to E with the tariff increase in descending order”, he said.
Protests Trail Increase
The increase has come with protests from almost every quarters, apart from probably the ruling party, the All Progressives Congress (APC), and those connected to the current administration one way or the other.
The Nigeria Labour Congress (NLC) condemned the plan to increase the electricity, with its Pesident,Mr Ayuba Wabba, saying that such an action would only add more pains to Nigerians amidst the covid-19 pandemic.
The Peoples Democratic Party (PDP) also rejected the fresh increase in the price of fuel to N151 per litre and electricity tariff to N66 per kwh under the All Progressives Congress (APC) led government.
The opposition party described the action as callous, cruel and punishing in a statement by its National Publicity Secretary, Kola Ologbondiyan, who demanded an immediate reversal of the prices to avert a national crisis.
“The party demands an immediate reversal of the prices to avert a national crisis, as the increase will result in upsurge in costs of goods and services and worsen the biting hardship being faced by Nigerians, who are already impoverished and overburdened by APC-imposed high cost of living in the last five years” PDP said.
Well done