Electricity Tariff Hike: Power Ministry, NERC Forcing Nigerians To Pay For Their Inefficiency

The pan-Yoruba socio-cultural and political organization, Afenifere, has decried the over 200 per cent electricity tariff increase, saying that it will thwart the current administration’s effort at boosting the economy as businesses shrink.

Afenifere, in a statement issued by its National Publicity Secretary, Comrade Jare Ajayi, recalled that as recently as Thursday, April 4, 2024, President Ahmed Bola Tinubu underscored the role that private sector plays in the economy.

He did so while hosting some members of the business sector in Aso Rock Villa. According to the president, “There is no driver of the economy that is bigger than the private sector. If the private sector is not flourishing, there is no growth, no prosperity, no employment or development”.

Afenifere spokesman then wondered how businesses could flourish as desired by the President when the amount to be paid per kilowatt hour (kWh) of electricity jumped from N68 to N225 just within 24 hours of its announcement.

Mr. Musliu Oseni, the National Electricity Regulatory Commission’s Vice Chairman who made the announcement of the sudden increase said that only those who enjoy 20 hours of electricity supply or more (out of 24 hours that make a day) were affected by this increase. They were categorized to be on Band A.

He said that the additional revenue would attract investments into the energy sector just as he promised that his commission would deploy several tools to ensure that customers in Band A would get the said 20 hours of electricity supply from distribution companies (DisCos).

Minister of Power, Chief Adebayo Adelabu, corroborated Oseni when he said that the increment would affect only 15 per cent of electricity consumers in Nigeria which translates into only 1.5 million customers.

The Minister went further to say that the present government “is so sensitive to the pains of the people; … and we are not ready to aggravate this suffering any longer.” He then called on players in the power sector to ensure that consumers get value for whatever they pay for.

Taking a swipe at this reasoning, Ajayi submitted that it is erroneous to say that only those who are direct enrollees in a particular Band utilize the power being supplied through that band.

“For instance, a Band A consumer is likely to have people in his/her household or place of work where the power is being consumed. Meaning that if 1.5 million is the figure the government has as enrollees on Band A, the number of people who depend on the power coming therefrom would be about five times that figure.

“Besides, by calling on players in the power sector to ensure that people get what they are paying for is like putting the cart before the horse”. According to Ajayi, the sing-song virtually everywhere now is the poor supply of electricity and low quality of the commodity sometimes.

“If the relevant government agencies are to be sincere with Nigerians, what they should do is to first ensure regular and efficient supply of electricity before acceding to increase in payment for services that are being poorly rendered.

“A rough calculation indicated that a person on Band A who was paying an average of N50,000 per month (on N68 per kWh) would now have to pay N170,000 for the same service. Note the increase!

It is noteworthy that the Ministry and its agency, the NERC, are interested in the revenue that would be generated rather than first ensuring regular and efficient supply. This is in contra-distinction to the claim that the government agencies care about the pains of Nigerians.

“It is clear that rather than exploring ways to reduce the cost of producing energy thus reducing the pains of Nigerians, the relevant government agencies are passing the price of their own inefficiency on the people. For instance, an increase in the cost of gas was used as the reason for the hike in electricity tariff.

“Yet, it is clear that even the present cost of producing gas, and by implication electricity, can be made more efficient. In other words, both the price of gas, as well as, electricity would be far lower than what they are present if the agencies concerned had gone into research and/or taken advantage of available information on cost-efficient production of energy.

For instance, a report by Pricewaterhouse Cooper (PWC) indicated that “harnessing Nigeria’s proven gas reserves can stimulate an estimated Gross Value Added (GVA) of US$18.3 billion annually to the domestic economy. In addition, optimizing the domestic utilization of gas could support 6.5 million Full Time Equivalent (FTE) jobs for the local economy” (from the Executive Summary of a 2020 Report of PWC titled ‘Evaluating Nigeria’s Gas Value Claim’.

From the foregoing, it means that were relevant government agencies up to their responsibilities, not only would the costs of producing gas and electricity be cheaper, but millions of people would also be employed directly and indirectly. Studies have revealed that natural gas, wind and solar are the cheapest sources of electric energy.

It is surprising therefore that the Ministry of Power and its agencies could not go in this direction and/or encourage generating and distribution companies to go in that direction.

Beyond the above, it has been established that with adequate investment in gas exploration, Nigeria could become the gas powerhouse of Africa. But at the moment, with gas production standing at an average of 2.53 trillion cubic feet (tcf) in about two decades, it means that what is being extracted for proper utilization is less than one per cent of Nigeria’s reserve. What is the power ministry doing in this respect?

“When, in 2013, the federal government unbundled the Power Holding Company of Nigeria (PHCN) into power generation companies (GenCos) and distribution companies (DisCos), it was with the expectation that the energy sector in the country would be as obtained in countries from where such facility was introduced to Nigeria. But alas, what have we been having – lamentations!

The situation became so bad that many Nigerians were nostalgic for the days when the government was handling the power issue directly. No appreciable value seems to have been added to what they inherited from PHCN.

Unfortunately, the government (through its relevant agencies) that was supposed to ensure that we get the best does not seem to be keen. One of the alibis given for the hike was the increase in the price of gas being purchased by electricity generation companies (Gencos) from $2.18 to $2.42 as announced by the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA). A simple arithmetic would show that the percentage of gas increase is not the same as the one announced for electricity which is over 200%!

Minister Adelabu also stated that the government can no longer continue paying subsidy on electricity. “As the experience from the subsidy on petrol has shown, those who suffer from the government’s withdrawal of subsidy are not necessarily those who benefitted from it. The victims would be average Nigerians who would patronize services being rendered or items being produced by high-power users since they (the latter) would easily pass the higher cost onto their customers.

Thus, what Nigerians are suffering for today – and what they are being forced to pay for – is the failure of the relevant government agencies to discharge their responsibilities to the people – Research, innovate, move with the time etc.

It would be recalled that broadcasting stations were forced to migrate to Frequency Modulation (FM) from Short Wave Band just as computer users had to move from desktop to laptop. The same can be done in the power sector. The in-thing today is solar, wind and gas.

“But the appropriate government agencies are disappointing Nigerians. Rather than look for means of taking Nigerians to the modern-day power technology, they chose to be milking the people. The way things are now, no effort should be spared in making the exploration of gas, wind and solar more efficient for the purpose of generating energy etc”.

In conclusion, Afenifere called on President Bola Tinubu to compel the Ministry of Power, to reverse the present hike, go into alternative energy sources like solar and wind, review the terms with which the 2013 exercise was carried out and be more innovative.