For many Nigerians, the first 22 days of President Bola Ahmed Tinubu’s administration have been ‘bitter-sweet.’
His quick-fire decisions, hailed by many variously as “bold,” “decisive,” and “correct,” are not without attendant effects that are grim and gruelling for the average Nigerian.
For instance, the price of Premium Motor Spirit (PMS) has soared following the removal of fuel subsidy. Recently, there has been speculation of an impending Value Added Tax (VAT) on PMS. An electricity tariff increment scheduled for July 1 has further unsettled Nigerians.
The development comes as Nigerians grapple with the harsh economic realities brought about by the removal of fuel subsidy, a lot of workers have been suffocated with the high price of transport fare to work due to hike in fuel price which is affecting their punctuality and finances, Nigerian groans more as salary paid are not even enough to transport themselves to work and transport kids to school and now it is electricity tariff increase.
Two popular social media influencers, Kelvin Odanz and Daniel Regha summed up the sentiment of most Nigerians.
“Fuel subsidy is gone; education subsidy is gone; VAT introduced for diesel, that would drive its price up and affect the cost of goods in the market. Electricity subsidy is about to go off. All these within one month. Too fast. Too much. Nigerians are suffering. We are being suffocated,” Kelvin Odanz tweeted on Monday.
Daniel Regha bluntly averred that the current government’s policies were not favourable to the masses.
“Tinubu meeting Bill Gates and Dangote in the presidential villa shouldn’t be news. The visit is making headlines, but what has this administration done that favours the masses? From removing fuel subsidies to reportedly planning an increase in electricity tariffs. It’s never about us,” he wrote on Twitter on Monday.
Going by the NERC’s orders, in 2015, the average tariff across distribution companies (DisCos) and classes of end-users was N25 kilowatt, in order of 198/2020, which came into effect on September 1, 2020. The average tariff went to N60 per kilowatt; in the MYTO for 2022, the average tariff was N64 across classes of customers.
The foreign exchange rate used in determining the 2015 tariff was N198.97/$, N383.80/$ was used in 2020, while N441.78/$ was used in 2022. The inflation used in the 2015 MYTO was 8.3 per cent, 12 per cent was used in 2020 and 16.97 per cent in 2022.
Currently, the inflation rate is 22.41 per cent and some experts have projected that it would hit 30 per cent by the end of June given the floating of the naira and subsidy removal on PMS.
Coming as the metering gap remained at over seven million, gas prices, losses and actual generation capacity are other elements in determining the tariff.
While NERC’s projected tariff for July 2023 was expected to remove subsidy and increase the previously frozen tariff band D and E, increasing the bands from N54.59/kilowatt to N62.16 for band D and N48.37/kilowatt to N61.16 on average with an average increase across the bands moving to N67/kilowatt, the prevailing floating of the naira and spike in inflation is projected to move the new average tariff to about N88/kilowatt for the sector to recover the cost.
Energy expert, Prof Wunmi Iledare, said the restructuring of the forex market creates worries as it appears as a devaluation of the naira, adding that he’s not comfortable blaming subsidy removal and paying the right tariff for decoupling Nigeria’s economy from forex instability.
According to him, people must support the government in its effort to stop the dollarisation of its economy even if electricity tariff and petroleum products prices rise to a not-too-comfortable market-clearing price.
Iledare, however, questioned the current energy pricing in the country, adding that the PMS pricing which stayed after the NNPC announcement is anticompetitive based on the dominant firm market structure.
“Price hike cannot just depend on forex in the electricity market. Market fundamentals are key to rate determination in a decreasing cost industry producing essential commodities, like power,” Iledare noted.
Energy lawyer, Madaki Ameh, said the never-ending upward reviews of power tariffs have become some sort of blackmail on electricity consumers and should be addressed through the Consumer Protection Council or an organized body of electricity consumers.
“Indexing the cost of electricity on the dollar is a huge mistake because most of the inputs for electricity supply are local. The DisCos are also holding Nigerians to ransom by failing to increase the supply base, thereby spreading the tariffs across a broader spectrum of consumers to reduce the unit cost of electricity,” Ameh said.
He insisted that as long as there remain many unmetered consumers and many others not connected to the grid at all, the few consumers on the grid would continue to be subjected to unjust tariffs, which are not reflective of the quality of service delivered.
Ameh hoped that the signing into law of the new Electricity Act would mark “the beginning of light at the end of the long tunnel of inefficient and epileptic power supply in Nigeria.”
President of Nigeria Consumer Protection Network, Kunle Olubiyo stated that while the last major review of electricity tariff was benchmarked at $1/N400, the floating of Naira and harmonisation of the exchange rate put the exchange rate at about N750/$.
“It will affect the tariff template and result in an upward review of electricity tariff.
“As important as this may be, two things are quite imperative to help in achieving a win-win for the demand and supply side of the coin.
Moving forward, governments through relevant regulatory institutions should liberalize end users’ customers ‘access to effective metering and mass metering to help in drastically closing the ever-increasing huge metering gaps,” Olubiyo said.
He asked the government to look into gas pricing and align it with domestic gas obligations.
“Gas to power generation plants/ thermal plants should be allowed to access gas which should be traded in local currency,” Olubiyo said.
