Electricity hike drives up Abuja hotel lodging costs- Hotel owners

HOFA President Mrs. Funmi Kazeem stated that the higher electricity costs have significantly impacted the operational expenses of hotels, leading to elevated room rates according to an interview with the News Agency of Nigeria.

Kazeem highlighted that the hospitality sector, which includes hotels, resorts, and other tourist facilities, has been severely affected by these increased operating costs.

She noted a reduction in customer patronage and a decline in investment within the sector, which has subsequently decreased its competitiveness and adversely affected the broader economy. Additionally, the tariff hike has impacted the standard of living for many individuals across the country.

“The hike in electricity tariffs has significantly challenged our hotel business and our customers. Addressing these and other challenges is vital for sustaining progress and promoting economic growth.”

Despite these difficulties, Kazeem lauded the Bola Tinubu-led administration for its policies aimed at boosting economic growth through privatization and foreign investment.

She acknowledged achievements in the tourism sector, such as increased investment, improved infrastructure, and successful marketing campaigns, but emphasized that issues like security concerns, economic instability, infrastructure gaps, and limited marketing efforts still persist.

Some hotel guests interviewed also linked the high cost of lodging to the broader economic situation in the country, citing factors such as the exchange rate and general inflation.

Businessman Mr. Clinton Brown noted that with the high costs of electricity and diesel, hotel owners have little choice but to pass these expenses on to their guests. “Room rates, as well as the prices for food and drinks, have doubled compared to last year,” he explained, urging the Federal Government to implement policies to alleviate the broader economic hardship.

Another guest Obinna Chukwueku, observed that many hotels in the FCT are adjusting to the economic realities by increasing their rates to cope with the doubled operational costs. “Those without alternatives are in a difficult position. For those who can manage, it’s about finding a balance between cost and convenience,” he said.

Doris Ezekiel, a fashion designer, attributed the high lodging charges to the increased electricity tariffs and other operational costs, including higher taxes and regulatory fees. She pointed out that many standard hotels in Abuja have doubled their lodging costs due to these financial pressures.

Nigeria’s inflation rate rose to 33.95% in May 2024, up from 33.69% in April 2024, according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS).

This 0.26% point increase marks a steady rise in the cost of living, with the year-on-year inflation rate jumping by 11.54% points from 22.41% in May 2023.

The International Monetary Fund (IMF) had earlier highlighted that high inflation in Nigeria is a significant source of hardship for its citizens.

In April, the Federal Government, through the Nigerian Electricity Regulatory Commission (NERC), approved an increase in electricity rates for consumers categorized under Band A, as announced by NERC Vice Chairman Musliu Oseni in a press statement.

In response to the tariff hike, the Organised Private Sector in Nigeria, which includes the Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), National Employers Consultative Association (NECA), Nigerian Association of Small Scale Industrialists (NASSI), and National Association of Small and Medium Enterprises (NASME), warned that over 65% of businesses in Nigeria might shut down due to the over 200% increase in electricity tariffs.

In response to the tariff hike, the Organised Private Sector in Nigeria, which includes the Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), National Employers Consultative Association (NECA), Nigerian Association of Small Scale Industrialists (NASSI), and National Association of Small and Medium Enterprises (NASME), warned that over 65% of businesses in Nigeria might shut down due to the over 200% increase in electricity tariffs.

The Nigerian Electricity Regulatory Commission (NERC) later confirmed an 8.1% reduction in electricity tariffs for customers under the Band A category for all power distribution companies (DisCos) in the country.

Despite this cut, the inflationary pressures and high operating costs continue to challenge businesses and consumers alike, exacerbating the economic difficulties faced by many Nigerians.