A few days close to July 1, Electricity Distribution Companies (DisCos) have begun to issue notices of tariff increment to consumers following the naira’s floatation that has resulted in the rise of exchange rates.
Notices sent out by some of the DisCos such as Abuja Electricity Distribution Company (AEDC), Eko Electricity Distribution Company (EKDC), and Ikeja Electricity Distribution Company (Ikeja Electric), urged customers to make bulk purchases before July.
EKDC said that “We may be looking at a base tariff of N100 per kWh for Band C (12 – 16 supply hours per day). Bands A (20 hours and above) & B (16 – 20 hours) will be much higher,” while Ikeja Electric warned its customers that “Electricity units are set to jump by 30-40% in just over a week. You are best advised to buy as many units as you can before July 1”.
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The AEDC said under the proposed hike, bands B and C, with supply hours ranging from 12 to 16 per day, will receive a new base tariff of N100 per kWh while customers under band A with longer hours of electricity supply will receive a higher tariff.
The DisCo explained that the increment was orchestrated by the government’s decision to float Nigeria’s forex market, which has seen the naira fall as low as N815 per dollar in the Investor & Exporter window.
“Dear Valued Customers, effective July 1st, 2023, please be informed that there will be an upward review of the electricity tariff influenced by the fluctuating exchange rate.
“Under the MYTO 2022 guidelines, the previously set exchange rate of N441/$1 may now be revised to approximately N750/$1 which will have an impact on the tariffs associated with your electricity consumption.
“For customers within bands B and C, with supply hours ranging from 12 to 16 per day, the new base tariff is expected to be N100 per kWh while Bands A with (20 hours and above) and B (16 to 20 hours) will experience comparatively higher tariffs.
“For customers with a prepaid meter, we encourage you to consider purchasing bulk energy units before the end of this month as this will allow you to take advantage of the current rates and potentially make savings before the new tariffs come into effect.
“For those on post-paid (estimated) billing, a significant increment is imminent in your monthly billing, starting from August”, the notice said.
The Nigerian Electricity Regulatory Commission (NERC) 2022 Multi-Year Tariff Order (MYTO) has a fixed price based on exchange and inflation rates, which have been impacted by the floating of the naira. The 2022 MYTO exchange rate, which was pegged at N441/$1, has now been moved up to N750/$1.
This development is expected to cause a 40% spike in electricity tariffs. This comes along with the signing of the Electricity Bill into law by President Bola Tinubu. The Electricity Act is expected to liberalize the power sector by empowering states, companies, and individuals to generate and distribute electricity.
However, economists have expressed fear that Nigerian consumers cannot afford an increment in electricity tariff for now, given the nation’s harsh economic realities. There are also concerns that further spikes will cripple Nigeria’s manufacturing sector as well as the Small & Medium Enterprises (SMEs).
The Manufacturers Association of Nigeria (MAN) said the move is “simply outrageous.”
“It is highly concerning for manufacturers to witness the electricity tariff skyrocketing beyond the present embattling high prices, starting July 1st. A 40 percent hike at this time is simply outrageous,” MAN said in a statement signed by its Director General Mr. Segun Ajayi-Kadir.
The association said the further hike in electricity tariff will compound inflation, which stood at 22.41% in May.
“In addition, the manufacturers would ultimately pass on the additional cost to the consumers of their products, which will increase the cost of locally made products in the market and complicate the rising inflation rate in the country.
“An increase in electricity tariff will reduce the purchasing capability. One of the resulting effects is the fall in demand and recession of manufacturing activities over time,” it said.
Even Custom is also adjusting to exchange rate, resulting to about 40% increase on duties. It just feels like too many punches are being thrown at ordinary people at the same time, hoping that they will absorb all of that without breaking, unfortunately it does not work like that.
Do we really understand the problems we believe we are trying to solve? Upward review in pay cheque is incapable of holding things together, because not many people earn formal income, and there’s no productive base to support substantial upward review on wages, except you just want to print paper money and share, which is equally counterproductive.
The value of naira is depreciating while every service provider or product seller is asking you to pay more, in other words, you are paying more from less. This is a quick march to poverty, in case you are still wondering what it entails.
The next three months will be very interesting in Nigeria, as the play goes on.