President Muhammadu Buhari on Tuesday approved the increment of electricity tariff for selected consumers. The decision is in line with the proposed cost-reflective electricity tariff for the Nigerian Electricity Supply Industry (NESI).
Under the NESI tariff, residential areas classified as poor will not be affected by the new tariff, as it is aimed at industrial areas.
Tariff increment has been a bone of contention between electricity suppliers and consumers, with Distribution Companies (DisCos) attempting repeatedly to implement proposed upward review of billing. But the government’s intervention has restrained the planned tariff review for months now.
In January, the Nigerian Electricity Regulatory Commission (NERC) announced there would a new tariff regime starting from April 1. But the House of Representatives intervened, and asked the regulator to shove the idea to curtail the strains of COVID-19.
Apart from COVID-19, metering is another issue that keeps instigating the intervention of the lawmakers. The national assembly has insisted that consumers be metered before any tariff plan would come into effect. Therefore, an attempt by the Minister of Power Sale Mamman to shift the proposed increment to July 1 was opposed by the leadership of the national assembly.
The Senate President Ahmed Lawan said then that consumers must be properly metered before any plan to hike tariff would be condoned, and given the economic impact of the pandemic on Nigerians, the timing for the tariff increment was wrong.
“The joint leadership of the National Assembly sat with DisCos and Nigerian Electricity Regulatory Commission. We believe that this is not the right time to increase the tariff in the electricity sector. Nigerians have a lot of challenges today because of the COVID-19 pandemic and the situation requires that we do everything possible to make life easy for our citizens.
“Of course, the government is doing a lot in this respect but we believe that DisCos should meet with consumers, find better cost-effective tariffs. But before then, there must be some steps to ensure that the consumers are properly metered, otherwise, you will still go back to guessing what consumers are consuming. That is to say, that to let the billing be scientifically based, it has to be based on what you actually consumed,” he said.
Consumers have been groaning under the weight of estimated billing as a result of insufficient metering. The situation has been attributed to the 35% levy imposed on imported items, which forced DisCos to abandon meters at the ports. The development has thus stalled the implementation of the Meter Asset Providers (MAP) scheme.
To close the metering gap, Buhari approved a one-year waiver of 35% import tax on prepared meters. The Cable reported that the decision came after the Minister of Finance; Zainab Ahmed made a plea for speedy deployment of meters to fast-track the MAP scheme.
The special adviser to the Minister on media and communications, Yunusa Abdullahi acknowledged in a statement that the 35% tax is stymieing the implementation of MAPs.
“The 35 per cent levy was imposed on the recommendation of the Federal Ministry of Industry, Trade and Investment, to encourage local production, as well as protect investments in the local assembly of electricity meters.
“An important feature of the MAP regulation is a gradual up scaling of the patronage of local manufacturers of electricity meters with an initial minimum local content of 30 percent with the potential of significant job creation in the area of meter assembly, installation and maintenance.
“Even though the 35 percent was in existence since 2015, the MAP regulations by NERC in 2018 to bridge current electricity metering gap did not factor the 35 percent levy in arriving at the regulated cost of electricity meters to end-users.
“This is to immediately bridge that gap between the demand for electricity meters and local supply. It is also envisaged that this will provide protection for local electricity meter manufacturers and the opportunity to ramp local capacity in the production of meters,” Abdullahi said.
The new tariff will be reviewed quarterly upon kickoff from September 1. The federal government has been seeking a $1.5 billion loan from the World Bank, for the power sector. The World Bank had given tariff increment as a criterion for the approval of the loan, saying it’s the only way investors can come into Nigeria’s power sector.
Buhari therefore ordered mass metering to end arbitrary charges emanating from estimated billing.