Nigerians don’t know if they will have to pay more for energy starting today or not because the Distribution Companies (Discos) first said no and the Nigerian energy Regulatory Commission (NERC) hasn’t said anything about it.
The Manufacturers Association of Nigeria (MAN) said that they were told about the planned raise in early June. They also said that they hadn’t heard anything different from the DisCos.
You may remember that the DisCos told their customers together that the price of energy would go up starting today. The NERC came up with a plan called the Multi-Year Tariff Order (MYTO) years ago. Under this plan, the expected gain falls.
MYTO gives the Nigerian electricity industry a 15-year tariff path, with minor reviews every year to account for changes in things like inflation and gas prices, and big reviews every five years, when all of the inputs are looked at with all of the stakeholders.
The DisCos sent statements to their customers almost two weeks ago. In the statements, the DisCos said that the planned increase was based on the MYTO and that the review was because the naira’s exchange rate with the dollar changed on the market.
Abuja Disco, for example, told its customers that some bands’ prices will go up to N100, while other bands’ prices will go up even more.
“As of July 1, 2023, please be aware that the changing exchange rate will cause an increase in the price of energy. Under the MYTO 2022 guidelines, the exchange rate that was previously set at N441/$1 may now be changed to around N750/$1, which will affect the prices you pay for your energy.
“The new base tariff is likely to be N100 per kWh for customers in band C, whose supply hours range from 12 to 16 per day. Bands A and B, whose supply hours range from 16 to 20 per day, will have higher tariffs.
Customers with prepaid meters should think about buying bulk energy units before the end of this month so they can take advantage of the current rates and possibly save money before the new prices take effect.
“Starting in August, your monthly bill will go up a lot if you have post-paid (estimated) billing,” the AEDC said.
Both the Ikeja Disco (IEDC) and the Eko Disco (EKDC) told their guests the same thing. But a few days later, AEDC changed its mind and asked its customers not to worry about the planned rate rise because the increase had not been approved.
“Please ignore the message going around about a review of power rates. Be aware that no approval has been given for such increases. We’re sorry for any trouble,” AEDC said.
Three or four of the last five times that tariffs were raised in the country, NERC did it quietly. Nigerians tried to find out from the commission what they could expect today, but the members of the commission who could speak for it all kept their mouths shut.
But a person in the commission said that, NERC had asked the DisCos in a new memo to wait until the first week of July before making a decision. But the source wouldn’t give The Guardian the memo.
A source at the offices of the Manufacturing Association of Nigeria (MAN) in Abuja, said that the DisCos were just trying to save face after the uproar, and that the price hike would probably still happen, but this time it would be done quietly. He also said that they thought it was strange that the NERC was keeping quiet while the DisCos said there would be no increase, even though they had been told otherwise.
“It is strange, to say the least, that they say there won’t be a rise. In a memo sent to us in early June about the review and codification of eligible customer regulations (ECR) and the guidelines on the competition transition charges (CTC), they said they wanted to talk to us about proposed changes to the ECR and the CTC guidelines in order to strengthen the implementation of the two regulatory instruments for better service delivery, and we know what that means.
We haven’t been given any other straight information, so we assume that the increase will still happen, but they don’t want to make a big deal about it. “I can’t even start to think about how this will affect us in the future,” he said.
Kunle Olubiyo, president of the Nigeria Consumer Protection Network and coordinator of Power Sector Perspectives, said that the price might be raised again in a quiet way.
“It has been done in the past without a fuss. We won’t know that the unit has been raised until people start to notice changes in it,” he said.
Most people took to Twitter yesterday to complain about problems with vending machines as they rushed to buy things before today.
Idowu Tidy, an end-user, said he bought units through his bank but never got his code.
He said, “Please keep in mind that there is a delay in making the ticket. He got a message that said, “Token will be sent soon.”
Akinlolu Olaniyan had the same worry and said that he had sent emails and texts but hadn’t heard back.
“We need to bring this selling problem to the attention of Ikeja Electric. I think it’s a trick to get a lot of people to re-up after the increase goes into effect on July 1,” said a customer who called himself Crown.
The previous government had passed a Service-Based-Tariff (SBT) plan, which meant that the price of electricity would go up twice a year. This was done to bring in more money and improve the financial situation in the power sector.
The reason for the rise should be that there is more power, but the opposite is true.
From July 2022 to March 2023, the distribution companies made N681 billion in revenue, but the state of electricity has stayed the same or gotten worse since the SBT went into force.
Yesterday, some interested parties said that the Federal Government and NERC may be delaying the execution of the tariff increase to buy time and stop the backlash that is already happening because of the change.
Nigerians spoke out against the move a few weeks after the fuel discount was taken away and the naira was allowed to float against the dollar. At the time, inflation was rising.
Due to a lack of income, the electricity sector still receives a subsidy of about N50 billion per month. The tariff hike that is set to happen today will be another test of the President Bola Ahmed Tinubu administration’s market reforms.
Based on the NERC’s orders, the average tariff for all distribution companies (DisCos) and groups of end-users in 2015 was N25/kilowatt, according to order 198/2020, which went into effect on September 1, 2020. The average price for all types of users in the MYTO for 2022 was N64.
N198.97/$ was the exchange rate used to figure out the 2015 price. In 2020, N383.80/$ was used, and in 2022, N441.78/$ was used. The inflation rate used for the 2015 MYTO was 8.3%, for 2020 it was 12%, and for 2022 it was 16.97%.
At the moment, inflation is at 22.41 percent, and some experts think it will reach 30 percent by the end of June due to the floating of the naira and the loss of the subsidy on PMS.
Even though metering customers remained a mirage in the face of a seven-million-person gap, the new government may have to make up for the shortfall in that market due to changes in economic indicators by not raising prices.
Adetayo Adegbemle, convener and executive director of PowerUp Nigeria, said that the power sector is priced in dollars, so changes in the exchange rate would make the shortfall in the energy market even bigger.
“The price of gas is in dollars. That will leave the sector with less than it needs. “There will be a huge failure to recover,” said Adegbemle.
But Dr. Percy Chukwuma-David, an energy economist, has said that the planned tariff increase is bad timing and bad design.
His words: “First, the so-called fuel subsidy has just been taken away, and Nigerians are just starting to face harsher economic facts head-on. Because of the Federal Government’s stance on education, fees are going up at federal universities. This hurts a lot, and it hurts families, who make up the income of the whole country. This fee rise hasn’t had a full effect yet because students don’t fully understand what it means.
“A few months ago, the price of power went up, and Nigerians are still trying to deal with the economic effects. Now, another rise in tariffs is set to start today. This is not only bad timing, but also a bad way to run an economy. The effects on businesses and families, especially in the informal sector, would cause inflation to get out of hand and cause more people to lose their jobs. The operating costs (Opex) of businesses will go through the roof, which will drive up the prices of goods and services.
There will probably be job losses, which will make the already high jobless rate in our country even worse. This is too much for Nigerians to handle, and I don’t know who the government’s advisors are, but they need to tell him that as long as there is nothing to soften the effects of all of this, and given our limited economic power, the results might be too much for this government to handle.
Chukwuma-David told the government to make sure that economic problems are dealt with in layers and that enough time is given for things to happen. He stressed that once the effects and benefits of a policy have been seen, they can be sorted out before a new policy is put in place.
He also said, “Putting all of the tough economic policies in place at the same time will have bad effects, and I don’t know how the government plans to help Nigerians deal with those effects. Palliatives have been talked about, but what do they really mean? We still don’t know what it means. How do they plan to set it up? Do they know the numbers of the most affected families and the businesses that need economic and financial help from the government?
“We need to tell this government that it needs to make a plan for its economic policies and carry them out one at a time, instead of trying to do everything at once. Nigerians are the ones who have to deal with all of these practices, and it’s hard to believe that people are still alive.
In a recent TV interview, Otunba Francis Meshioye, the president of MAN, also said that the rise was outrageous.
“This has always been a problem. We have been scared about our businesses because of what has been going on. They’ll go to our shops and turn off the power, but nothing will happen.
“We’ve talked to NERC about it more than once. We have a plan for how the price should go up, but NERC just goes ahead and does it without consulting anyone. This is not right. We need to make sure that if we agree on a plan, everyone sticks to it.
