In a statement released on Friday, the Lagos Chamber of Commerce and Industry (LCCI) expressed deep concern over the adverse effects of the high-interest rates on the Central Bank of Nigeria’s (CBN) Treasury bills.

The Director-General of LCCI, Dr. Chinyere Almona, noted the detrimental impact these rates are having on the private sector, redirecting funds away from business expansion and development.

Dr. Almona acknowledged the CBN’s efforts in curbing inflation and stabilizing the exchange rate but stressed the importance of achieving these objectives without stifling private sector growth. She particularly highlighted the plight of Small and Medium Enterprises (SMEs).

“The recent hikes in the MPR have directly translated into higher interest rates, making it more expensive for businesses to access credit for working capital, expansion, and sustainability.

“We have consistently advised that rate hikes alone will not curb inflation without resolving challenges of the real sector of the economy,” she said.

While acknowledging that high interest rates may attract both foreign and local investors to government treasuries, she lamented the consequences of funds being diverted away from the private sector.

“The real sector has demonstrated the capacity to create more jobs, manufacture products for consumption and export, and sustain the industrial base of the economy.”

“While we understand that high-interest rates attract Foreign Portfolio Investments and local investors to treasury bills and bonds, we lament the drying up of funds away from the private sector to government treasuries,” she said.

In addition to concerns about interest rates, Dr. Almona also addressed the issue of electricity subsidies. While recognizing the potential for attracting foreign investment through realistic pricing, she expressed worry over the disproportionate burden placed on businesses due to unreliable service provision despite increased tariffs.

She advocated for a comprehensive metering initiative to ensure accurate billing for all electricity consumers.

The backdrop to these concerns lies in the CBN’s aggressive sale of Treasury bills since the first quarter, with interest rates ranging between 19% and 22%, nearly aligned with the Monetary Policy Rate (MPR) of 24.75%. This move was aimed at mopping up excess liquidity in the economy to curb inflation.

According to analyses, the CBN is expected to spend approximately N1.01 trillion in interest rates to defend the naira.

The LCCI’s position stands in support of calls by economic experts on the urgent need for a balanced approach by the CBN, one that addresses inflationary pressures without stifling private sector growth. They have called for collaborative efforts between monetary authorities and stakeholders to create an enabling environment for sustainable economic development.

In a bid to ensure transparency and fairness in electricity billing practices, the Nigerian Electricity Regulatory Commission (NERC) has issued directives to all Electricity Distribution Companies (DisCos) regarding the implementation of the April 2024 Supplementary Multi-Year Tariff Order.

The new tariff order empowers DisCos to implement A N225 kilowatt per hour tariff for Band A customers, entitled to at least 20 hours of electricity supply per day.

The directives, outlined in a circular signed by Abba Terab, Market Competition, and Rates DGM, mandate DisCos to provide clarity to affected customers and adhere to specific guidelines.

According to the circular, DisCos are required to implement the following updates:
1. Maintain ONLY the newly approved Band A feeders listed in the April 2024 supplementary orders for vending to prepaid customers and billing for postpaid customers.
2. Post the schedule of approved Band A feeders affected by the rate review on their websites.
3. Set up a portal on their websites by April 10, 2024, allowing customers to check their current Bands by entering their meter or account numbers.
4. Refund customers wrongly billed at the new rate through energy tokens no later than April 11, 2024, and provide evidence of compliance by April 12, 2024.
5. Ensure compliance with the requirements listed above, with ongoing monitoring by the Commission and support provided to stakeholders as needed.

The issuance of these directives follows reports of non-compliance by Abuja Electricity Distribution Plc (AEDC), which implemented the new tariff order for all bands of electricity customers under its jurisdiction. As a consequence, NERC levied a heavy fine of N200 million on AEDC for violating the Order and failing to adhere to prescribed customer band classifications for tariff billing.

“AEDC has been fined ?200,000,000 (Two Hundred Million Naira) for failure to comply with the prescribed customer band classifications for the tariff billing,” NERC said in a statement.

NERC said its decision to take enforcement action against AEDC underscores its commitment to protecting consumer rights and ensuring equitable practices within Nigeria’s electricity sector. The Commission’s thorough review and customer feedback revealed that AEDC had applied the new tariff to all customer bands, contrary to the Order’s provisions aimed at promoting fair billing practices.

In response to NERC’s enforcement action, AEDC is mandated to reimburse all customers in Bands B, C, D, and E who were billed above the allowed customer categories/tariff bands provided in the Order.

Additionally, AEDC must reimburse affected customers through the provision of balance customer tokens at applicable rates, with all reimbursements to be issued by April 11, 2024.

Furthermore, AEDC is required to file evidence of compliance with the directives by April 12, 2024.

The newly announced electricity tariff has generated a lot of backlash from many corners of the country, with many decrying it as oppressive and insensitive, given the current poor economic situation of the Nigerian people.

The primary issue revolves around the inadequate power generation of the nation, currently at approximately 4,000MW, which falls significantly short of meeting the demand for a stable electricity supply to consumers. Against this backdrop, consumers in Band A are worried that they might not receive the service they are paying for.

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“This tariff review is in conformity with our policy thrust of maintaining a subsidized pricing regime in the short run, with a transition plan to achieve a full cost-reflective tariff over a period of, let us say three years.” – Nigeria’s Minister of Power, Adebayo Adelabu.

It looks scary but what the Honourable Minister is trying to do is actually what should be done. I understand the emotions and his non-elegant way of explaining things (an example: asking people to switch off freezers to save energy cost), but the path he is taking is the right one.  Many do not pay electricity bills in Nigeria even as they complain of no electricity. So, besides reflective tariff, we must ensure we also improve collections.

Our challenge as a nation is how to make the rich pay their fair share. In America (feel free to attack me for bringing comparison), those in the cities pay more for phone bills than those in the rural areas. Their model is that if you do not subsidize the low density rural areas with the revenue from the high density city areas, no person can afford rural telephony.

If you apply that in Nigeria, Eti Osa LGA cannot be on the same rate as Epe on electricity rates, just like Oriendu Market Ovim traders cannot pay the same rate as Ariaria Aba traders. It is our lack of the use of data that makes our governance system inefficient.

I just want to caution the Honourable Minister, you cannot phase out electricity tariff; it would be a bad policy. What you can do is to phase out all for commercial customers, modulate for some residential customers especially in rural areas, but sustain subsidy for industrial customers to make them globally competitive as energy is a huge component of production.

For industrial customers, if a $100m subsidy helps to improve output by $15 billion, when you tax that output and activity associated with it, you can recover that $100m. But if a high tariff makes their products so expensive that the only option is Chinese products, Nigeria loses. Always remember that whenever Nigerian Customs beats annual revenue targets  on import duties, we are de-industrializing Nigeria; reverse that for us.

In a move that could potentially impact millions of Nigerians, the Nigerian government has hinted at extending the recent increase in electricity tariffs to customers beyond the Band A classification.

The announcement came just two days after the Nigerian Electricity Regulatory Commission (NERC) approved the tariff hike for Band A customers.

During a briefing held in Abuja on Friday, the Minister of Power, Adebayo Adelabu, outlined the government’s plan to gradually phase out electricity subsidies in the country. He described the recent tariff increase as a pilot phase in this transition process, aimed at attracting more investment into the power sector.

"This tariff review is in conformity with our policy thrust of maintaining a subsidized pricing regime in the short run, with a transition plan to achieve a full cost-reflective tariff over a period of, let us say three years." – Nigeria's Minister of Power, Adebayo Adelabu.

It… pic.twitter.com/p0tN6tQuHy

— Ndubuisi Ekekwe (@ndekekwe) April 6, 2024

Nigeria Hints at Further Electricity Tariff Increase, Emphasizes Phasing Out Subsidy