Owners of manufacturing firms, the organised labour and other stakeholders have opposed the latest increase in electricity tariff by the 11 Distribution Companies (DisCos).
The Nigerian Electricity Regulatory Commission (NERC), an agency of the federal government, approved the increase in a circular titled: Order NERC/225/2020, signed by the Chairman, Sanusi Garba, dated December 31, 2020, effective January 1, 2021.
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The organised labour and the leading opposition the Peoples Democratic Party (PDP) described the action as deceitful and urged the government to reverse the decision or face the anger of Nigerians.
Increase in inflation and FOREX
NERC in a statement on Tuesday confirmed the adjustment of the electricity tariffs between two naira and four naira, saying it was to reflect the increase in inflation and foreign exchange rates.
According to the statement, the Commission said although tariff increases for Bands D and E (Customers getting power below 12 hours daily) remain ‘frozen’, it, however, admitted that the tariff rates for these classes of customers were also “adjusted’ upwardly.”
The statement said: “In compliance with the provisions of the Electric Power Sector Reform Act (EPSRA) and the nation’s tariff methodology for biannual minor review, the rates for service bands A, B, C, D and E have been adjusted by N2.00 to N4.00 per kilowatt-hour (kW-hr) to reflect the ‘partial’ impact of inflation and movement in foreign exchange rates.
“Any customer that has been impacted by any rate increases beyond the above provision of the tariff order should report to the Commission.”
In the new revised Service-Based Tariff (SBT) Order NERC/225/2020, the commission said it considered the 14.9% inflation rate rise in November 2020, foreign exchange of N379.4/$1 as of December 29, 2020, available generation capacity, US inflation rate of 1.22% and the Capital Expenditure (CAPEX) of the power firms to raise the tariff.
The latest increment will last till June 2021, while a Cost Reflective Tariff (CRT) expected to raise the new cost higher will be activated from July to December 2021, the NERC Order revealed.
Daily Trust had reported that in December 2020, NERC notified that it had begun a review for another tariff amendment, which has been completed and had taken effect from January 1, 2021.
DisCos confirm increment
Kaduna Electric, one of the 11 DisCos confirmed the hike.
A source at the DisCo said the increment was roughly about N3 as the new tariff rate will move from N53 to N56.
“Based on the November agreement, the first phase of the tariff was between November and December and then there is another phase between January and June then June to December.”
Another official at KEDCO, the energy company that serves Kano and environs, also confirmed the tariff hike within the range specified by NERC.
The situation is the same with most of the DisCos in different parts of the country.
How FG approved 3 tariffs in 5 years
Daily Trust reports that this is the third tariff increase NERC has approved for the 11 DisCos in five years.
It had increased the Multi-Year Tariff Order (MYTO) 2015 by what customers described as over 50 per cent on February 1, 2016.
The MYTO template for reviewing tariff increase or decrease ought to be reviewed twice a year and the result implemented every six months.
Although indices like inflation, foreign exchange rates, gas prices went up with a lower generation capacity, prompting a further increase by June 2016, NERC could not implement at least nine tariffs on a biannual basis, which piled up until 2020.
In the quest to gradually increase tariff by what it called Cost Reflective Tariff (CRT), NERC planned a tariff hike of the Service-Based Tariff (SBT) in April but postponed it to July due to the COVID-19 pandemic.
It approved the hike for the DisCos starting September 2020 but suspended it after severe outrages.
The Commission amended it with discounts and reintroduced it on November 1, 2020, which makes it the second tariff hike since 2016.
The new increase in January 2021 is the third of such in the last five years with a hike of about 25% on average varying across the DisCos.
NERC in the latest order planned another increase by July 2021, which will formally introduce a higher rate known as the CRT that it had targeted since 2020.
A tailor in Lagos, Mr Chibuzor Njoku, said the tariff would harm his business.
“Due to the economic situation in the country, customers are not willing to pay more for services rendered to them. So, it is a very difficult situation for us,” he said.
Mr Sabitu Olajide, a welder at Mafoluku in Oshodi-Isolo Local Government said that the new increase coming at the beginning of the New Year would deepen the suffering of artisans in the country.
Also speaking, Mrs Morili Bamidele, who sells soft drinks, said she buys 110 units for N7, 500 and it doesn’t last her for a month.
“It is therefore difficult to break even not to talk of making any profit.”
An entrepreneur who specialises in industrial sewing in Yaba, Lagos, Mr Oladapo Taofeek, said at his home in Mushin, he receives over N20, 000 monthly bill (current charge) on his flat.
A welder based in the Diobu area of Port Harcourt, Emeka Chukwu said that the electricity tariff increase will have a multiplier effect on the end-users of their products.
An aluminium steel designer, Umar B. Yakubu in Sharada, Kano, said he lost confidence in the electricity sector because of inconsistency.
In Bayelsa, some of the residents said there are some parts of the state, most especially Yenagoa that have not had electricity since December 2020, therefore increasing tariffs in such a situation amounts to exploitation.
One of them, Nkem Linus who has a cold store for fish, said: “Those in government should fear God and look at the direction of the masses.
“How can they allow the DisCos to keep on reviewing the tariff without a corresponding result?”
Decision deceitful – NLC, TUC
President of the Nigeria Labour Congress (NLC), Ayuba Wabba, and his Trade Union Congress (TUC) counterpart, Quadri Olaleye, on Tuesday, berated the government over the increase.
Wabba said, “This is not only condemnable, but I think there are some elements of deceit in it.
“We are going to resist it and Nigerians must also stand up to resist it because it is like exploitation and it means that this exploitation will not have an end.”
On his part, the TUC President, Olaleye said the government was deliberately inflicting pains on Nigerians, noting that the government had resolved to cripple Nigeria’s economy completely.
According to him, “The TUC is disappointed by the recent hike in electricity tariff by the federal government while negotiations are ongoing with the organised labour on the last hike that became effective from November 1, 2020, because of the untold hardship it has brought on the workers and Nigerians as a whole.
“Sometimes we wonder why this government espouses unfriendly policies that are capable of crippling the economy.”
Experts, CSOS seek reversal
The Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, said he had predicted the hike in his recent economic and business review for the year 2020 and outlook for 2021.
While he noted that the policy might have led to some form of hardship for individuals and businesses, he stressed that the reform remains the most sustainable policy option needed to attract and sustain investment in the power sector.
“The economy is currently in a recession, purchasing power has been significantly eroded across all income classes, poverty situation has been worsening, and there is spiralling inflation, there are fresh concerns about the resurgence of the COVID-19 pandemic,” he said.
However, the President, Nigeria Consumer Protection Network (NCPN), Mr Kunle Olubiyo said in his comments: “The Nigerian Electricity Regulatory Commission is expected to provide elaborate details on the dynamics and implications of the Multi-Year Tariff Order effective January 1, 2021, because it has implications on consumers.”
A Development Economist and lecturer at the University of Benin, Professor Anthony Monye- Emina, said: “There is never a good time to announce any kind of price increase and in the case of Nigeria, it is not different.”
He said the timing was wrong and trying to rationalise it under any guise was not justifiable.
The Civil Society Legislative Advocacy Centre (CISLAC) and Corporate Accountability and Public Participation Africa (CAPPA) also asked for the immediate reversal of the latest hike.
The Executive Director, CISLAC, Auwal Ibrahim Rafsanjani, said no matter how little the increment is, it was a wrong decision because Nigerians were battling with so many challenges of survival.
“It is an additional burden on Nigerians and government should reconsider it,” he said.
The Director of Programmes, CAPPA, M Philip Jakpor, said it was unfortunate that the current administration, through its “flip flop policies” continued to make life difficult for the ordinary Nigerian.
“Nigeria’s power generation has not climbed beyond 10,000MW of which distribution is an abysmally 5,000MW at its peak.
“It is an ill-advised policy and Nigerians may be forced to hit the streets again to demand a halt to the policy moving forward,” he said.
PDP asks Buhari to rescind decision
The PDP has rejected the ‘new year gift’ of hike in electricity tariff as approved by the All Progressives Congress (APC)-led federal government, and urged President Muhammadu Buhari to rescind the increase.
The party in a statement on Tuesday, by its National Publicity Secretary, Kola Ologbondiyan, described the development as insensitive and anti-people.