The introduction of the Service-Based Tariff (SBT) system in Nigeria was intended to reflect a more equitable approach to electricity billing, aligning costs with the quality of service provided. However, as with many well-intentioned policies, the implementation has exposed significant flaws, leading to what many perceive as a sophisticated form of banditry rather than a fair, consumer-oriented solution.
A matter of choice, not coercion
At the heart of the controversy is the lack of consumer choice in determining which tariff band they fall into. Under the current system, consumers are arbitrarily assigned to bands based on the area they live in. For example, residents of Garki, Abuja, are automatically lumped into Band A, expected to pay the highest tariffs because of the presumed reliability of their electricity supply.
This one-size-fits-all approach is inherently unfair. Not every resident of Garki—or any other area, for that matter—shares the same economic reality. While some can afford the increased tariffs, many others, including low-income earners and small business owners, are unjustly burdened by a system that fails to account for individual circumstances.
The very essence of the Service-Based Tariff should be rooted in fairness and flexibility, offering consumers the ability to choose their preferred service level based on their financial capabilities. Instead, the current implementation imposes a blanket policy that disregards the economic diversity within neighborhoods, undermining the principle of choice that should define any service-based system.
The illogic of banding: Sophisticated banditry?
The logic behind the banding system becomes even more questionable when one considers that electricity companies are already charging based on the actual hours of electricity supplied. If this is the case, what is the justification for further categorising consumers into bands?
The bands seem to serve no practical purpose other than to create an additional layer of complexity—and cost—that consumers must navigate. This added complexity does not translate into better service or more accurate billing; instead, it feels like a deliberate effort to obfuscate and extract more from consumers under the guise of “service improvement.”
In reality, the banding system does little more than institutionalise inequality, perpetuating a cycle where those with less are forced to pay more relative to their income. This isn’t just poor policy; it’s a form of economic banditry, where consumers are fleeced in the name of service-based reform.
The impact on businesses: An unbearable stress
The detrimental effects of the banding system are perhaps most acutely felt by businesses that rely on a steady and reliable power supply. Hotels, hospitals, and other service-oriented enterprises are bearing the brunt of these policies, with many struggling to stay afloat. Hospitals, in particular, should be exempted from the highest tariff bands. These institutions provide critical, life-saving services and operate under tight budgets.
Forcing them into Band A rates exacerbates their operational challenges, potentially compromising the quality of care they can provide.
It is hard to escape the conclusion that the regulators are aware of these inequities but have either turned a blind eye or, worse, are compromised. In a country where corruption and mismanagement often undermine well-meaning reforms, it is not unreasonable to suspect that the failure to address these glaring issues may be due to vested interests within the regulatory bodies.
A path to credibility: Reducing tariffs
The Nigerian Presidency, already mired in unpopularity due to a series of draconian measures, has an opportunity to regain some credibility by addressing the flaws in the electricity tariff system. By reducing tariffs, particularly for vulnerable groups and essential service providers like hospitals, the government can demonstrate a commitment to fairness and social justice.
In conclusion, the current implementation of the Service-Based Tariff system in Nigeria represents a gross distortion of what such a system should achieve. Rather than empowering consumers, it disenfranchises them, turning a potentially fair system into an instrument of economic exploitation. It is imperative that the government revisits this policy, introducing flexibility, fairness, and a true reflection of service levels, so that all Nigerians, regardless of their income or location, can access electricity at a fair and reasonable cost.
Prof. Babalola is Past President, Guild of Medical Directors.
