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Tariff increase on electricity ill-timed, unjustified

By Editorial Board
27 January 2023   |   4:10 am
The Socio-economic Rights and Accountability Project (SERAP) was clearly speaking the minds of majority of Nigerians when it recently called on President Muhammadu Buhari to direct the Minister of Power, Goddy Jedy-Agba and the Chairman/Chief Executive Officer, Nigerian Electricity Regulatory Commission...

Power grid

The Socio-economic Rights and Accountability Project (SERAP) was clearly speaking the minds of majority of Nigerians when it recently called on President Muhammadu Buhari to direct the Minister of Power, Goddy Jedy-Agba and the Chairman/Chief Executive Officer, Nigerian Electricity Regulatory Commission (NERC), Prof. James Momoh, to immediately reverse the “unlawful, unjust and unreasonable” increase in electricity tariff, which reportedly took effect in December 2022. The concern is understandable.

There have been several arbitrary increases in electricity tariff without a corresponding improvement in power supply, which amounts to cheating and fleecing members of the public. This injustice should have no place in a government desirous of meeting its constitutional commitment to the welfare of the people. Such arbitrary increases in power consumption tariff and indeed in the tariffs of any other business ought to take cognizance of the poverty level of Nigerians. When government imposes higher taxes, even in form of tariffs, without a corresponding increase in the remuneration of workers, the people are poorer for it.

Given also the huge intervention by government in the privatised power sector, along with its low return over the years, it is significant that SERAP urged the President to institute investigation into the spending of public funds made as ‘investments and bailouts’ by successive governments to electricity distribution companies, DisCos and generating companies GenCos since 2005 and prosecution of cases of corruption and mismanagement.

Following the reported approval by NERC, electricity tariffs were increased across DisCos in the country in December 2022. Several prepaid customers have confirmed the increase. The NERC had stated that: “Following consultations and directions on tariff policy, the Commission (NERC) hereby approves a deferment of the applicable tariffs for customers in service band D and E (that is customers with a service commitment of less than an average of 12 hours of supply per day over a period of one month) for the period 1st September 2020 to 1st January 2021.”

In its letter dated January 7, 2023 and signed by SERAP’s Deputy Director, Kolawole Oluwadare, the organisation said: “The increase in electricity tariff would exacerbate the extreme poverty across the country and undermine the ability of millions of Nigerians to satisfy basic human needs. The increase in electricity tariff failed to follow due process. It is entirely inconsistent and incompatible with provisions of the Nigerian Constitution of 1999 (as amended), the Electric Power Sector Reform Act and the country’s international human rights obligations.”

We cannot agree more with SERAP, as millions of Nigerians continue to live in darkness, despite huge spending by successive governments of trillions of naira as investments and bailouts to electricity companies. “The increase is unjustified, especially, given the unreliable, inefficient and poor quality of electricity supply in the country. Rather than providing electricity discounts to poor Nigerians, successive governments continue to give bailouts to electricity companies.

Indeed, the Federal Government should have, in line with SERAP’s admonition, used the report by the National Bureau of Statistics (NBS), which shows damning revelations that some 133 million Nigerians are poor, as a basis to improve access to regular electricity supply and extend electricity to remote rural households.

“The latest increase in electricity tariff is coming on the heels of the NBC report, which shows that over half of the population of Nigeria are multi-dimensionally poor and cook with dung, wood or charcoal, rather than cleaner energy. High deprivations are also apparent nationally in sanitation, healthcare, food security and housing,” SERAP said, reiterating that access to affordable electricity services is a prerequisite for improving the condition of people living in poverty. It is a means to generate other important services that mitigate poverty, bearing in mind that access to electricity facilitates the eradication of poverty.

It is no gainsay that the hike in tariff would increase financial burdens for socially and economically vulnerable Nigerians and further marginalise and disproportionately affect them and exacerbate their vulnerability to discrimination.

The reactions of groups and individuals condemning the tariff hike are largely uniform. For instance, Manufacturers Association of Nigeria (MAN), which has always questioned arbitrary tariff increase, said the increase is coming at a time that manufacturing was groaning because of deep injuries already inflicted on the sector by the prevailing harsh operating environment, the increasing burden of taxes and self-generated electricity.

Reacting to earlier increases, the Acting Director-General of MAN, Mr. Ambrose Oruche, said most of MAN-member companies were classified in the ‘D’ categorisation (D1, D2 and D3), meaning ‘Industrial Consumers’ where the tariff is the highest. The leadership of the Organised Private Sector in Nigeria (OPSN) also in a reaction noted that various projections for generation capacities for different years were made but not attained, yet tariff kept increasing.

While the need for cost-reflective tariff is not in dispute, as the Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, observed, there is the need also to consider the effect of an increase on the well being of Nigerians, considering the abysmal power being supplied and the huge negative effect on industry and commerce. Government ought to be concerned more for welfare of citizens than for increasing revenue without due regard to the surrounding circumstances. It is apparently with this in mind that the Nigeria Labour Congress (NLC) rejected the approved tariff hike by NERC. In a statement, its president, Comrade Ayuba Wabba said labour frowned at the increase and completely condemned any plan to inflict further pain on Nigerians at this very time of great economic distress.

Another area of concern about the increase is that majority of Nigerians have not been metered, meaning most consumers are still being charged the outrageous estimated bills. Government, through the regulatory NERC, ought to insist on prepaid metering for Nigerians who have for long suffered the imposition of fixed charges and estimated bills for electricity not consumed. The government is only being smart by half by removing the irritant fixed charge and then putting it back through the new tariff, which makes no difference.
As it were, the NERC can do a lot more to increase the efficiency and productivity of DisCos and even GenCos rather than dwelling on tariff increase. The power sector has been privatised and the new owners are not being enjoined to invest in the sector. Why the burden on hapless consumers at this time? Nigerians have suffered for too long because of epileptic power supply. Industrial production and a host of other economic activities that need power have been grounded. 

It is high time Nigerians through private individuals, corporate bodies, and establishments take up the challenge and produce power for sale. It is gratifying that many institutions are currently doing this. 

States should also take charge by generating power for their people irrespective of the complications in the exclusive legislative list that gives NERC the seeming monopoly over power supply. There lies the solution to the power problem, particularly exploration and exploitation of solar and other power supply potential. Asking people to pay more for non-available electricity is a scandal that the people’s representatives in all legislatures should reject with appropriate laws and oversight enforcement.